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Was Thomas Edison a Patent Troll?

To hear some people tell it, Thomas Edison was nothing but a scurrilous “patent troll.” That, at least, is the impression given in a recent article in Corporate Counsel magazine entitled ITC Rolls Out the Welcome Mat for Trolls that equates technology licensing with patent trolling.

The issue at the heart of the article was a recent decision by the International Trade Commission (ITC) reaffirming its long-standing policy of allowing firms that license rather than manufacture their own technology to enforce their patent rights before the ITC and seek injunctions barring the importation of infringing products into the U.S. In its article, Corporate Counsel singled out Tessera, a $300 million technology development and licensing firm, as one of the companies involved in this decision. But by using the terms “licensing firms” and “patent trolls” interchangeably, the magazine also implied that Tessera itself was a “patent troll.”

Nothing could be further from the truth. Tessera develops and licenses miniaturized technologies that enable electronic devices — such as cell phones, computers and cameras — to be smaller and less expensive. The company also manufactures and sells products based on its technology worldwide. Tessera operates two manufacturing facilities, spends $65 million a year on R&D, and employs 470 people — more than 60 percent of whom are technologists.

But more important than the misrepresentation of Tessera, the article does a disservice to its readers by confusing the harm sometimes caused by “patent trolls” with the beneficial role played by licensing firms (sometimes referred to as “non practicing entities,” or “NPEs”) in American technology development and economic growth.

For it turns out that it was precisely the ability of American innovators to specialize in invention while leaving manufacturing and sales to others that enabled the United States to develop one of the most innovative and successful economies in the history of the world.

At the time of our nation’s birth, those who led the revolution and were tasked with writing the Constitution struggled not just with creating lasting political structures that could defend the hard-won freedom and sovereignty of the newly-liberated colonies. They were equally concerned with finding some way of stimulating the rapid growth of American industry and commerce so as to ensure the new nation’s economic survival.

And make no mistake: the survival of the United States was far from certain in those days. Ours was a backward agrarian economy, dependent on imports and lacking significant domestic industry, with a population of barely three million inhabitants. Britain, meanwhile, with whom we had just fought a war and would soon fight another, had three times our population, boasted the most powerful economy on earth, and was the leader of the emerging industrial revolution.

All America had, other than abundant but untapped natural resources, was a population unique in the world for its prolific, independent, and enterprising character. Ours was the world’s fastest-growing population, doubling in size every 20 years. But more importantly, unlike the tenant farmers and laborers that made up the bulk of England’s rigid class society, the vast majority of Americans were free-holding small farmers, merchants, shopkeepers, artisans and mechanics — the forerunners of what we today call the middle class — who were possessed of what publisher Hezekiah Niles called at the time “a universal ambition to go forward.”

This was our key asset, our ace in the hole. And founders like George Washington, Thomas Jefferson and James Madison knew they had to find some way to stimulate the creative and productive potential of this mass of independent citizens if America was to survive.

As Jefferson wrote to his daughter Martha in 1787, it was precisely because America was bereft of Europe’s vast resources and left to its own devices that “we are obliged to invent and execute; to find means within ourselves, and not to lean on others.”

But how to do that? The historical record demonstrates that the founders very deliberately (the economic historians B. Zorina Khan and the late Kenneth Sokoloff say “quite self consciously”) designed the American patent system to do what no other patent system in the world had ever done before — namely, stimulate the inventive genius and entrepreneurial energy of the common man.

They did this first of all by introducing for the first time in any nation’s constitution an intellectual property clause that recognized the rights of inventors. But the real genius of the founders lay in the way they enabled this fundamental right to manifest itself in everyday life.

The first patent law passed by Congress on April 10, 1790 set patent fees at a level that any ordinary citizen could afford. Initially the fee was $3.70, but three years later it was raised to $30 — an amount that was still less than 5 percent of the rate in Britain, where patent fees were 10 times the per capita income of its citizens. And patent fees remained $30 for the next 70 years, ensuring that the patent system remained open to all citizens during the industrial revolution.

They also greatly simplified administrative procedures for applying for a patent. And by other means as well, including allowing anyone applying for a patent by mail to do so postage-free, they created a patent system that encouraged innovation on a truly mass scale.

The results were unprecedented. Whereas most of Britain’s handful of inventors came from wealth and privilege — who else could afford to engage in inventive activity? — most of America’s many thousands of inventors came from humble beginnings. They were farmers, factory workers, merchants, mechanics, and carpenters and other artisans for the most part.

Indeed, of the 400 iconic “great inventors” of the nineteenth century, more than 70 percent had only a primary or secondary school education, and half had little or no formal schooling at all. Moreover, many of the most famous names in American invention — men such as Matthias Baldwin (locomotive), George Eastman (roll film), Elias Howe (sewing machine), and Thomas Edison (electric light and phonograph) — had to leave school early to support their families.

But perhaps the most crucial element of the American patent system was that it did not simply encourage ordinary people to participate in inventive activity. It made it economically feasible for them to do so. By creating a market in which inventors with little or no capital could license their discoveries to enterprises that could then commercialize them, the patent system enabled unprecedented numbers of ordinary people to generate income from invention and thereby make it a full-time career. Which naturally generated even more innovation.

And remember, before the emergence of in-house corporate R&D departments in the early 20th century, patent licensing was the name of the game.Throughout most of the 19th century, announcements of new patented discoveries were placed in publications such as Scientific American that were expressly founded for the purpose of disseminating information about patents. Commercial enterprises would then license or purchase these patented inventions and use them in their product development. In 1894, for example, American Bell Telephone Company’s R&D department licensed 73 patents from outside inventors, developing only 12 inventions from its own employees.

Thomas Blanchard was a typical inventor-licensor. He was the son of a small farmer who invented and patented a mechanical tack-maker in 1806 that could fabricate five hundred tacks per minute, each superior to tacks made by hand. He sold the rights to his machine for $5,000, quite a sum in those days. He then invented a lathe to produce uniform gun stocks, and the patent he received for it enabled him to attract investors for the production of those gun stocks for the local Boston market. But Blanchard also leased the rights to this invention to gun producers nationwide, as well as to manufacturers of tool handles and wheel spokes. The income he generated from patent licensing enabled him to make inventing his full-time career, and he went on to invent a wood bending machine, an upriver steamboat, and a steam wagon that was used until the introduction of railroads in the U.S. He received a total of 25 patents during his career.

According to economists Khan and Sokoloff, patent licensing “made it possible for creative individuals to specialize more fully in inventive work.” And this, they say, in turn produced “higher rates of productivity in the generation of new technological knowledge.”

Patent licensing, in fact, offered a perfect proof of Adam Smith’s axiom that specialization and the division of labor leads to greater productivity and economic growth.

Only 13 years after the first patent law was enacted, America’s per capita patenting rate had already surpassed Britain’s, and we were generating more new patented inventions than our old colonial master, even though Britain still had twice our population.

By 1860, the number of new inventions patented in the United States was an astonishing seven times the number in Britain, although our populations were by then roughly equal in size.

All of which makes the opprobrium heaped upon licensing firms by the big tech companies today rather ironic. They can say all they want about NPE-initiated patent litigation being out of control, but the fact is that the patent litigation rate was actually far higher in the 19th century than it is today. Yet this did not seem to slow the industrial revolution any.

In fact, the industrial revolution never would have happened had it not been for NPE inventors like Thomas Blanchard and Thomas Edison who licensed most of their technology rather than commercialize it themselves. Patent assignment records show that that an astonishing two-thirds of all of America’s “great inventors” of the 19th century were actually NPEs.

There was nothing pre-ordained about our economic success, no special “Yankee ingenuity” trait in our genetic stock. What made America the most innovative and prosperous nation on earth was a uniquely-democratic patent system that enabled large numbers of ordinary citizens without wealth or access to capital to get involved in invention.

Patent licensing was their ticket to the American Dream.

The Author

David Kline
is a Pulitzer-Prize-nominated journalist, author, and communications strategist who has consulted for many of the most important IP-focused firms in the world. His journalism has appeared in the New York Times, Wall Street Journal, Forbes, The Atlantic, Harvard Business Review, and many other major media, and his bestselling book Rembrandts in the Attic from Harvard Business Press is considered the seminal work on patent strategy within corporate America. Named one of the World’s Top 300 Intellectual Property Strategists by IAM Magazine, Kline is also the author, most recently, of The Intangible Advantage: Understanding Intellectual Property in the New Economy, the first IP text book for general (non-law) audiences. That book is the foundation for the nation’s first-ever undergraduate course in IP, to be launched in the Fall of 2017 at the University of Southern California’s Marshall School of Business. Mr. Kline has authored four other books as well.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 113 Comments comments.

Steve MJune 1, 2010 9:47 pm

Here! Here!

Tom WJune 2, 2010 9:11 am

You have created a false correspondence between today’s NPEs and the heroic humble inventors of yesteryear who licensed their own inventions. Most NPEs do not do the inventing, they purchase the patents. Furthermore, they don’t purchase them with the intent of actively seeking partners to develop the technology. Instead they sit on the patents until somebody else has done the hard work of developing the same or similar technology on their own, and then they pounce and demand a tithe. That is the difference between “technology licensing” and “patent troll”.

American CowboyJune 2, 2010 9:36 am

“American innovators to specialize in invention while leaving manufacturing and sales to others”

That is still the way it is done, but with a twist. The innovators are company employees and are paid a salary instead of compensation measured by the value of their inventions. Costs the user of technology less that way. And when someone upsets that balance by suing for use of an invention, the Company calls foul — whether it is inequitable conduct or being a dastardly patent troll or some other unhelpful epithet.

Dale B. HallingJune 2, 2010 10:45 am

Thanks Henry & David,

It is amazing the number of people who miss the Adam Smith specialization value of full time inventors.

“For it turns out that it was precisely the ability of American innovators to specialize in invention while leaving manufacturing and sales to others that enabled the United States to develop one of the most innovative and successful economies in the history of the world.”

“Patent licensing, in fact, offered a perfect proof of Adam Smith’s axiom that specialization and the division of labor leads to greater productivity and economic growth.”

Thanks for setting the litigation record straight. Big tech has purposely used the explosion of groundless tort litigation to smear inventors and NPEs

“All of which makes the opprobrium heaped upon licensing firms by the big tech companies today rather ironic. They can say all they want about NPE-initiated patent litigation being out of control, but the fact is that the patent litigation rate was actually far higher in the 19th century than it is today. Yet this did not seem to slow the industrial revolution any.”

American CowboyJune 2, 2010 2:22 pm

Another thing about Edison is that he is the only inventor most folks know about, and the only invention they are familiar with is the incandescent light bulb. Laypeople think that Edison was sitting around in the candlelight and came up with the light bulb — that is, that the wax candle was the closest prior art. So they think that the difference between a candle and a light bulb is the proper measure of inventive step or non-obviousness. That leads to bizarre caselaw when those folks become SCOTUS justices.

David KlineJune 2, 2010 3:01 pm

>> “Most NPEs do not do the inventing, they purchase the patents.”

Do you have any evidence to support that statement, Tom W?

Because on the face of it, the claim that most NPEs do not invent seems highly improbable. First of all, I would bet that the overwhelming majority of independent inventors do not (and could not) commercialize their own inventions. That’s why they try to license their discoveries to major firms — and why there’s such a big business by “invention marketing” firms supposedly helping inventors do just that.

But I’d be very interested in any statistics on modern day licensers.

Gene QuinnJune 2, 2010 3:27 pm

To pick up on David’s comment and address the issue that “most” NPEs don’t invent…

The reality is that most NPEs do invent. Overwhelmingly independent inventors are NPEs and every year there are about 15,000 independent inventors who file patent applications on their own without an attorney or agent, so the overall number of independent inventors filing patent applications is obviously much higher.

Universities and federal labs are all NPEs and that accounts for a tremendous amount of inventing without practicing. Add onto that the R&D companies throughout various technologies and it is clear that to say “most” NPEs do not invent is misinformed.

That us why I prefer to us the term “patent trolls” because it deals with the bad actors alone. No one would call an independent inventor, University or federal lab a “patent troll.”

-Gene

Sent from iPhone

IANAEJune 2, 2010 3:47 pm

“The reality is that most NPEs do invent.”

The reality is also that most inventors are NPEs. There are about two million valid patents out there, and surely nowhere near all of the mare being practiced. Even big companies that make lots of products and also have huge R&D departments don’t practice a significant proportion of their patents. Maybe they license some of them, maybe they sell some of them to a “troll” who sees their economic potential, maybe the patents sit in a filing cabinet somewhere.

And can you really blame the guy who bought someone else’s patent because he saw the commercial value in what the inventor thought was merely a nifty idea? Why shouldn’t that guy be able to license out the technology if he happens not to own a factory?

The class of “people who invent/own a patent they do not practice” is way too large and diverse to make any meaningful general statements about them.

David KlineJune 2, 2010 3:47 pm

Then let’s take all the small biotech firms patenting their discoveries — I personally know several of these.

How likely is it that, say, a company like Innate Immune is going to come up with the hundreds of millions of dollars needed to develop an FDA-approved lupus drug based on its discoveries? More likely is that they’ll either license or joint venture with a large pharma company.

According to USPTO data, small entities (including independent inventors and small businesses) comprise about 20% of issued patents each year, or about 30,000 patents (although they represent 26% of the current patent backlog). You just know that a significant percentage of these patents will not be practiced by the small firm and independent inventor patentees — whether because they’re not practiced at all or because they’re licensed to others.

Maybe what Tom W means is that most of the law firms that acquire and litigate patents don’t invent anything. But most NPEs are certainly inventors.

David KlineJune 2, 2010 3:48 pm

Slip from IANAE who makes a very good point.

The Mad HatterJune 2, 2010 10:06 pm

For it turns out that it was precisely the ability of American innovators to specialize in invention while leaving manufacturing and sales to others that enabled the United States to develop one of the most innovative and successful economies in the history of the world.

Right, that’s why you don’t have a manufacturing segment anymore, that’s why so many Americans are out of work, and that’s why China and India are growing, while the United States is shrinking.

Great work. Just great.

Wayne

JiroJune 3, 2010 5:19 am

I think it is arrogant to claim that the wealth of America was caused by stimulating patents.
The assumption is made that more limited-time-monopolies-on-an-idea is better and so that the amount of patents quickly outstripped that of Britain is a sign of progress.
What the writer forgets to mention is that the people who wrote the constitution made patents available to all, equally, rather than a privilege bestowed upon those in favour of the powers that be.
American inventors had little to fear from European patents and so they could tap on research done there and monopolise it in America. Just look at the history of the lightbulb, where the first lightbulbs were invented in 1802 (Humpry Davy), the first vacuum lightbulb in 1840 (Warren de la Rue) the first carbon lightbulb that did not blacken in 1878 (Swan), and the first carbon filament lamp in 1880 (Swan). It was not until somewhere in 1880 that Edison came up with the carbonised bamboo filament, months after he received a patent on his carbon filament lamp.
The first patent on incandescent light is from 1841, so half of the inventive process was unpatented.
The value of the patent system comes from the disclosure of inventions and from enabling people to invent things who would not have been able to do so without the opportunity to commercialise their inventions using the patent system. The negative value from the patent system comes from people claiming monopolies on other people’s products of activities, whether they invented them on their own or not and whether something was invented or not (gene patents and involuntary cross pollination anyone?)
You’d have to consider whether the scope of patentable inventions and the scope of enforcement contributes to society as a whole or whether it just fuels a get rich quick dream of a few.

Scott DunnJune 3, 2010 7:49 am

So nice to see such a quaint revival of early America. Those times are gone and things have changed quite a bit. Patent hoarding is the game now. Patents are expensive, risky and are now weaponized for use against competitors rather than for disclosure and licensing. Lawyers make a point of writing broad claims with little specific description (particularly so with software patents). A case in point is Ariad v. Lilly, where Ariad was claiming the right to any and all compounds that have the effect of reducing genetic expression. Similar examples abound with software patents where the idea is patented, not the code. The court said that patents are not a hunting license, they are a reward for the conclusion of the search. But patent holders seem to think that they have the rights to the idea of the bridge rather than the method of building the bridge.

My problem with patents in general is that they are being used for land grabs of non-rival goods: ideas. This has been well documented by films like Patent Absurdity and books like Against Intellectual Monopoly. The patent system is now far from the democratic panacea described above. It seems rather a system of private monopoly, and the authors seem to think that a private monopoly is better than a public one. Isn’t that a form of socialism?

Blind DogmaJune 3, 2010 7:50 am

Oh, I think you left out a few things Mad Hatter…

…things like lax environmental laws, minimum wage control and other legislative effects, third -world conditions, foreign government manipulation (such as fixed currency transfer effects and blatent state sponsored industries) that have much more to do with China and India growing and US shrinking than the innovation factor. In fact, given all the other factors, it becomes even more apparent that Gene is correct and it is only because the US leads the world in innovation that the US has not fallen even further.

The Mad HatterJune 3, 2010 8:19 am

Blind Dogma,

Go back and read what I wrote again – I didn’t blame the innovation sector (in fact I didn’t even use those words), rather I blamed a POLICY OF THE UNITED STATES GOVERNMENT which they were lauding.

Wayne

David KlineJune 3, 2010 10:14 am

Thank you Mad Hatter.

The loss of manufacturing — and the crippling of middle class prosperity that has resulted — is another big failed policy that we take on in our upcoming book.

I used to think it was just a few cranks who warned against the loss of manufacturing. I bought Tom Friedman’s argument that so long as the U.S. “specializes in R&D and innovation,” it didn’t matter if other countries did the manufacturing. Boy, was I ever wrong. At the urging of my co-author I really looked into this issue instead of just accepting conventional wisdom. And I found out that R&D always follows manufacturing — and it’s doing so right now, unfortunately.

Anyway, in the end, what we’ve wriotten compleley blows away the “flat world” thesis. It’s a compelling human tale of what we’ve lost, and what we now have a last chance to recover. And I personally feel it’s the best thing I’ve ever written in my 32-year writing career.

All of which is just to say that we really can hold two great ideas in our heads at once (and maybe even more). We’ve got to fix the patent office and get this engine of innovation working better again, and we’ve got to regenerate a high-tech high-value manufacturing sector — something all other countries are now attempting to do — or we’re going to end up like a banana republic (only without the tin-pot dictators), with a few very wealthy people at the top, a mass of low-paid service workers at the bottom, and not a lot of people in between — the people we used to call the middle class.

David KlineJune 3, 2010 10:22 am

One more point to clarify, Mad Hatter. Specialization is good. Specializing in invention propelled the U.S. ahead of other countries. And it’s perfectly fine to leave commercialization to others so long as in the aggregate, the “others” include enough companies right here in the U.S. to preserve the basic elements of the value chain in order that the national economy reaps the benefits.

We don’t have to manufacture everything (and we’re certainly not going back to the 19th century). But for America to have almost no manufacturing in solar, wind, advanced materials, next-generation LED ligting, and other strategic high-tech sectors of tomorrow — in essence, to now be bit players in sectors that we originally invented — is suicidal. We’ve got to provide incentives for U.S. firms to get back in the game.

American CowboyJune 3, 2010 10:52 am

“We’ve got to provide incentives for U.S. firms to get back in the game.” If what you mean is that early-granted, enforceable, commercially broad patents on innovation as the incentive we need to offer, I agree.

If you mean another bureaucratic shell game of subsidies, tariffs, and quotas, I think not.

David KlineJune 3, 2010 11:07 am

Agreed. But I’d go a step further.

Every country on earth — except the United States — offers tax holidays and other meaningful incentives to companies that set up manufacturing operations in their national territory.

What does every other country know that we don’t?

They know that manufacturing is the greatest economic force multiplier in the world, creating up to 15 additional jobs outside of manufacturing (services, support, transport, etc.) for every position on the factory floor. They know that manufacturing creates a large, upwardly-mobile middle class that becomes the bulwark of a stable and prosperousd society.

The economic and social benefits a country gains from such subsidies far outweigh their cost in temporary lost revenues.

Last year the U.S. led the semiconductor industry in one area: semiconductor plant closings. If we simply offered the same incentives as China and Germany (anmd every other nation), we could turn this situation around.

Ever wonder why families in the 1960s and 70s could get by comfortably on one income, whereas families today can barely make it on two? Ever wonder why we as a nation used to have money for GI bills and interstate highways and new school construction, but today can’t even repair a few broken bridges without putting our grandkids in debt?

Manufacturing. It’s really incredible how beneficial it is to a society.

Every other nation understands that. We should, too.

MudJune 3, 2010 11:11 am

The invention of Edison was significantly narrower than incandescence or its application to the needs of artificial illumination.

Tessera’s claims, largely the result of long delayed contiuation prosecutions; as in for instance the U.S. Patent number: 6433419, with filing date of Jan 20, 2000 but alleging enablement by a disclosure made in September of 1990, would invite the reader to assume that Tessera is the inventor of a variety of facts of nature without any specific disclosure of materials that exhibit these properties.

The claims encompass a “semiconductor chip” (maybe fabricated in Silicon of some orientation) “having a coefficient of thermal expansion. Or maybe it’s a Gallium Arsenide “semiconductor chip” having at least on coeffecient of thermal expansion for the various materials of which it’s comprised. They also encompass a “backing element” (maybe it’s Polyimide, maybe it isn’t) with another coefficient of thermal expansion (no duh, it’s a different material) and traces of some non-specific conductive material (maybe it’s copper) connecting to “terminals” specified only as being electrically conductive (maybe they’re copper too, maybe not).

The reader is supposed to think, without evidence to support the claim, that for essentailly every claim of the “patented invention” somehow this arrangement “compensates” for the differential thermal expansion between the unspecified semiconductor substrate materials and the allegedly “movable” contact pads disposed on the backing element.

Are the authors certain that the “compensation” for the many thermal expansion coefficients doesn’t arise from slippage between the Semiconductor substrate and the backing element due to creep of the adhesive bonding the two rather than any “movability” of the “terminals” disposed on the backing element?

At least old Tom told us it was cotton thread and lampblack that he didn’t want us fiddling with.

Every country on earth — except the United States — offers tax holidays and other meaningful incentives to companies that set up manufacturing operations in their national territory.

What does every other country know that we don’t?

They know that manufacturing is the greatest economic force multiplier in the world, creating up to 15 additional jobs outside of manufacturing (services, support, transport, etc.) for every position on the factory floor. They know that manufacturing creates a large, upwardly-mobile middle class that becomes the bulwark of a stable and prosperousd society.

The economic and social benefits a country gains from such subsidies far outweigh their cost in temporary lost revenues.

As a salesman working for a Canadian Manufacturer I traveled a lot in the United States, and by a lot, I include the year I spent two months south of the border. And it was scary. Totally scary seeing how little manufacturing was going on.

It was also totally hilarious – I kept meeting the same people in airports, at government meetings – my Canadian competitors. We didn’t have ANY American competitors, which we all thought was nuts.

Last year the U.S. led the semiconductor industry in one area: semiconductor plant closings. If we simply offered the same incentives as China and Germany (anmd every other nation), we could turn this situation around.

Ever wonder why families in the 1960s and 70s could get by comfortably on one income, whereas families today can barely make it on two? Ever wonder why we as a nation used to have money for GI bills and interstate highways and new school construction, but today can’t even repair a few broken bridges without putting our grandkids in debt?

Manufacturing. It’s really incredible how beneficial it is to a society.

Agreed. Canada is in marginally better shape than this, however I plan to raise merry hell with Tony Clement this summer, as he isn’t doing enough to protect Canadian Manufacturing in my not so humble opinion. If you tell me the title of your book, and when it is due out, I’ll talk to him about it till he reads it just to get rid of me ;]

David KlineJune 3, 2010 2:16 pm

Hey, thanks Mad Hatter. It’s already looking like our book will have some impact here in the U.S. — both within the entrepreneurial community and among Washington policy makers — and of course we’d love Canadian leaders give thought to the issues we raise because the same challenges exist in all countries to one degree or another.

The book is “Great Again! An Entrepreneurial Plan for Revitalizing America’s Innovation Leadership,” to be published by Harvard Business Press in early 2011 (maybe February).

The premise of the book is simple: Since we know that up to 80% of all economic growth and increases in living standards comes from technological innovation, any effort to stimulate the economy or improve living standards must of necessity focus on incentivizing or removing roadblocks to innovation.

So we propose a simple, practical and achievable plan for removing the 5 key roadblocks barriers that entrepreneurs and innovators face in today’s innovation ecosystem.

1) Fix the patent office and end the startup-killing backlog in unexamined patent applications. The “why” of doing this is explained rather dramatically (in case you don’t already know) in this article of ours:

2) Rebuild a high-tech manufacturing capability in the U.S., because without it, all our vaunted R&D and innovation will eventually bleed away — in fact, this process has already begun — and the middle-class will be permanently destroyed.

3) Reform our self-destructive post-9/11 immigration policies that are driving tens of thousands of brilliant foreign-born engineers and entrepreneurs back to their home countries to start their breakthrough new busineses rather than encouraging them to start those businesses here like they used to. It’s right to try to stop illegal alien drug dealers and terrorists. But we ought to have a sign at all of our ports of entry that says, “Entrepreneurs and geniuses welcome!”

4) Get the government back in the business of incubating world-changing innovation, just like it used to in the 1950s-1980s. Neither Big Government (the left) nor No Government (the right) is the answer. We need Smart Government policies that facilitate the kind of public-private partnerships that led to the birth of the railroads, aerospace, Internet and other breakthrough industries in the past 150 years.

5) Ease the burdensome tax and regulatory shackles that are crippling startup formation and growth today — such as the application of IPO killing Sarbanes-Oxley accounting rules to small startups. In the last 60 years, every single innovation that led to the creation of whole new industries and millions of new jobs — from semiconductors to PCs to the Internet — has been developed by small startups. And if we cannot distinguish between the necessary and proper regulation of a giant economy-threatening firms like Goldman Sachs and the self-destructive over-regulation of high-tech startups, than we really are dumber than we look.

So that’s basically where we’re going with this. My partner Hank Nothhaft has led 6 startups to major success in his 35 year career. His practical experience, combined with my winning personality and good looks, should help us give voice for the first time ever to the real needs of the entrepreneurial community.

Dale B. HallingJune 3, 2010 2:39 pm

David,

We need to re-examine the whole premise behind publication of patent applications and the idea that patents are national in scope. These two policies make it easier for our trading partners to steal our technology than compete with us on developing new technologies. Publication broke the basic social contract between society and the inventor. Society gets the advantage of the disclosure, even if the applicant never receives a patent.

In addition we need Patent Reciprocity. If you drive your car across the border into Canada you do not lose title to your car. If you take your manuscript across the border into Canada you do not lose the copyright to your manuscript. But, if you take your invention across the border into Canada, you lose your patent protection and anyone can steal the invention – not the physical embodiment, but the underlying invention.

IANAEJune 3, 2010 2:43 pm

“They know that manufacturing creates a large, upwardly-mobile middle class that becomes the bulwark of a stable and prosperous society.”

Manufacturing without strong unions and labor laws creates a large lower class, not a middle class. The factories of the early industrial age did not create a middle class. That’s a big part of the reason these jobs are leaving. How much do you want to pay a guy to put things together? Answer: as little as possible. All this outsourcing isn’t creating middle classes anywhere else in the world, though it is creating an upper-lower class in places where any tiny wage is still economically significant. The class that makes the rich truly wealthy by buying all the consumer electronics and luxury products and shares of stock was not born of free market capitalism, but will die of it.

The rich won’t care one bit until they run out of money, and then they will realize that you can’t have a good bottom line without a good top line no matter how much you cut costs.

IANAEJune 3, 2010 2:49 pm

“But, if you take your invention across the border into Canada, you lose your patent protection and anyone can steal the invention – not the physical embodiment, but the underlying invention.”

You can’t grow flowers in your neighbor’s yard either, because you don’t have rights there. You have essentially a right of exclusive use that is territorial in extent. That’s not a bug, it’s a feature.

A lot of your rights are different in Canada. If you want patent rights in Canada, get a Canadian patent. Remember, if you hadn’t bothered to file in the US you wouldn’t have had any rights in the US either. Your rights are not in the invention, but in the patent.

Also, Canada sort of has patent reciprocity. Tell the examiner your claims were allowed in the US, and see if you don’t get an allowance.

David KlineJune 3, 2010 3:03 pm

I’m not aware of anyone proposing manufacturing but only if it’s without unions or labor laws.

The strike currently unerway in China at Honda plants suggests that, just as the law of uneven development indicates, the Chinese are undergoing many of the same social struggles that America witnessed in its manufacturing sector in the 1930s-1950s.

And as the NY Times pointed out this week, the fact that Chinese authorities allowed the strike to continue — and what’s more, allowed media coverage of it — suggests that even they realize that this is the normal and expected process of social development towards creating a robust middle class.

But sometimes manufacturing incenmtives can bring industry to a desperate and struggling region and greatly benefit a local economy even in the absence of unions.

Another thing to consider is that even union leaders now call for incentives and tax holidays for the bosses. This is certainly not the union mantra of old — at least not the mantra of unions I once belonged to in my younger days.

United Steelworkers union president Leo Gerard told me himself that labor’s conflict with business pales before the common interests both have in rebuilding a viable U.S. manufacturing sector.

Put another way, what’s better for the people and the economy of a state — 100 $40/hour union jobs, or 10,000 $25/hour non-union jobs?

I think most people would say that the latter is preferable — at least to start.

Then we can show the Chinese that American workers haven’t forgotten how to fight for their rights.

IANAEJune 4, 2010 9:21 am

“I’m not aware of anyone proposing manufacturing but only if it’s without unions or labor laws.”

They don’t phrase it as “without unions or labor laws”, they manufacture in countries that don’t have those things.

“United Steelworkers union president Leo Gerard told me himself that labor’s conflict with business pales before the common interests both have in rebuilding a viable U.S. manufacturing sector.”

Big surprise. Workers realize they don’t get paid if their employer goes out of business.

No matter what concessions the workers make, American workers will never be competitive with foreign workers who can do the same job. They simply can’t survive on the same wage. There is no viable US manufacturing sector to be built. Of course more jobs would be better for the people and economy of the state, but neither the people nor the state are empowered to make that decision. The employer makes that decision, and his decision is purely based on maximizing his own benefit.

“Then we can show the Chinese that American workers haven’t forgotten how to fight for their rights.”

Americans never forgot how to fight for their rights. Problem is, their employers have universally responded with “fine then, we’ll go hire those other people instead, who don’t have those rights”.

Those manufacturing jobs are not coming back. They will keep migrating around the globe, searching for workers who would rather scrape by on a few pennies a day than fight for their rights.

Blind DogmaJune 4, 2010 10:23 am

IANAE speaks to but one reason (albeit better than I did at June 3rd, 2010 7:50 am, and in more detail), why the comparison and “fault-finding” are like apples and oranges.

One needs to recognize that the citizen of the corporation owes no allegiance to any specific country. Any MBA graduate can tell you that profit maximization does not care about national goals.

I do not see how a race to the bottom can be avoided. I do not see human nature being stopped from seeking the place where workers can be paid the cheapest and the environment can be raped the harshest. I fear that any attempt to enforce a type of bare minimum humanity level of those laws that drive manufacturing out of the US simply will not be agreed upon by other countries of the world who are more than willing to suffer the lower wages and environmental ruin because the tradeoff simply looks better to them right now.

David KlineJune 4, 2010 10:46 am

“No matter what concessions the workers make, American workers will never be competitive with foreign workers who can do the same job. They simply can’t survive on the same wage. There is no viable US manufacturing sector to be built.”

I understand why you assume the above to be true, IANAE, but when you look closely at the data, it’s actually not the case as you describe.

Take China. China’s labor costs are one-third to one-half of U.S. costs depending on the level of expertise. However, there is quite a bit of inflation and also a high level of turnover which means they have some efficiency problems.

But fine, let’s just say the net-net right now is that China has a 50 percent advantage in labor costs. Since labor represents an average 7 percent of operating costs across all of the semiconductor sectors, that means China has a 3.5 percent overall cost advantage.”

Add in China’s tax holiday, and firms locating there get an additional 2.5 percent advantage because they avoid paying 25 percent tax on a 10 percent operating profit.

So that brings China’s total cost advantage as a manufacturing location to roughly 6 percent.

But what if manufacturers were given a tax holiday in the U.S.? If you take the roughly 30 percent tax Intel paid on 10 percent operating profit between 2004-2008 as a guide, then that would result in a 3 percent lower cost of operating a plant here,. Add in an enhanced, permanent 20 percent R&D tax credit equal to what other nations offer, and China’s advantage drops to perhaps 1-2 percent.

So, can we overcome a 1-2% cost advantage for China?

Absolutely. Remember, the U.S. still retains a very high percentage of the R&D centers and the high-tech machinery used in manufacturing. Companies can use the faster time to market they’d get by locating their plants here — and all the benefits of having their R&D closer to manufacturing — to remain competitive with, if not superior to, anything the Chinese can do in the high-tech field.

But we’ve got to have some help from Washington to make that happen.

As former Intel CEO Craig Barrett put it: “[It] costs $1 billion more to build, equip and operate a factory in the U.S. than it does outside the U.S. Most of the $1 billion difference is the result of lower taxes combined with capital grants.”

So it seems China’s labor advantage is not as steep as it first seems — especially when you consider that in high-tech manufacturing, labor costs are only a very small component of the cost of manufacturing.

In Chhina, the labor cost advantage turns out to be roughly equal to the advantage we gain by offering a tax holiday to manufacturers who locate here — just like other countries do.

And when you add up all the advantages on each side, we balance out or even come out ahead when you add in the faster time to market and more concentrated R&D prowess located here.

Which is why, when U.S. states like Alabama and Wisconsin offer such incentives, foreign manufacturers like Mercedes and Honda or the Spanish wind turbine manufacturer Ingeteam are happy to open up factories here in the U.S. rather than go to China.

Imagine how many more manufacturers, domestic and foreign, would locate here if the feds stopped undermining the states’ incentives by taking a 30% federal tax.

But without such incentives, we are finished as a manufacturing location.

David KlineJune 4, 2010 10:50 am

Slip from Blind Dogma.

What he and IANAE forget is that labor costs are only a minor fraction of total operating costs — especially in high-tech manufacturing of strategic products of the future like solar, wind, LED illumination, etc.

Maybe if we were talking about rebuilding shoe manufacturing in the U.S., they might be right because labor is going to be a major cost nof manufacturing in that sector.

But we’re not talking about regaining our 19th century shoe industry. We’re talking about high-tech, high-value manufacturing, which enables the U.S. to maintain its R&D leadership and which diffuses the wealth created by new innovation out to the masses of Americans.

David KlineJune 4, 2010 11:05 am

From a recent article entitled “The Innovation Delusion” by Ralph Gomory, Research Professor at NYU, President Emeritus of the Alfred P. Sloan Foundation and former IBM Senior Vice President of Science &?Technology:

“Cheap labor abroad is cited as the incurable handicap that explains why the United States cannot compete. But cheap labor doesn’t explain the fact that Japan and Germany, both high-wage countries, are successful in the automobile industry. Nor does it explain how semiconductors, a model of a high investment, low-labor content industry, are mainly made in Asia. The premise that the inescapable burden of competing against low wages means failure is simply not correct.”

and …

“Today our companies are motivated to take innovations abroad, produce there and import the goods into the United States. Increasingly we can expect services also to go overseas. We must produce here in the U.S.A., to employ the people of this country, and we must keep their activities effective by a steady stream of innovations in design and production. While other countries roll out a welcome mat of tax breaks and subsidies for our companies because their common sense tells them that their people being employed in productive work is the road to being a rich country, we provide no incentive for U.S. companies to produce here.”

IANAEJune 4, 2010 1:50 pm

“What he and IANAE forget is that labor costs are only a minor fraction of total operating costs — especially in high-tech manufacturing of strategic products of the future like solar, wind, LED illumination, etc.”

Sure, the picture looks different if we focus on industries that are less labor-intensive. The incremental benefit of cheap workers is smaller. But also, those industries are less labor-intensive. They don’t create as many jobs.

It may not be glamorous to think of all the low-tech manufacturing jobs that have gone overseas never to return, but that was an awful lot of jobs that won’t all get replaced by people assembling iPhones and solar panels. We need those lost jobs in addition to the ones in emerging industries. There simply aren’t enough jobs that need doing in America to keep a large proportion of the population comfortably ensconced in the middle class, and buying fancy things that other middle-class Americans put together. That was only possible because we were making pretty much everything we bought, and paying each other to do it.

The Mad HatterJune 4, 2010 7:11 pm

Not too many years ago a Korean company I know built a plant in the UK, because they could produce machinery there cheaper than they could in Korea, because the population was educated, and more productive. There’s also a lot of manufacturing in Canada for the same reason.

The point being, that if the American government isn’t willing to fix the school system, no one will want to manufacture in the USA.

Wayne

Blind DogmaJune 5, 2010 9:54 am

Mad Hatter,

School system? Is that why the bulk of the manufacturing left the US in the first place seeking the fabulous school systems in third world countries? Is that why the Steel belt turned to rust when the companies first sought the great education systems of the South, before leaving the country altogether? Was it the great education systems of Mexico that prompted NAFTA?

David Kline does have a point and there is room to distinguish between types of manufacturing, but IANAE is also correct in that the bulk of manufacturing – the lead out of the exodus – is manufacturing that does not take a great education base, but does take the bulk of the jobs.

The Mad HatterJune 6, 2010 7:07 pm

Blind Dogma,

I’m just pointing out that one way that a country can differentiate itself to companies looking for a place to setup shop is by having a well educated work force. Like in Canada, or Germany, or Sweden.

The United States on the other hand has a third world school system now, where once it was the envy of virtually all other countries.

I understand that you are pointing out one way for a country to distinguish itself. I am not saying that such may not be helpful for landing certain types of jobs (e.g. high tech, high quality).

I am merely pointing out the historical context that shows that what you are your pointing out doesn’t matter in regards to the exodus of the larger number of jobs that corporations move in efforts to find the lowest cost factors.

The point of the matter is, in fact, that education has mattered very little, as the US education system was in a much higher relative position to the countries that the jobs ended up in. I will grant that there is a trade off in quality versus cost – but in that trade-off, quality is almost always second to cost.

The Mad HatterJune 8, 2010 10:14 pm

I understand that you are pointing out one way for a country to distinguish itself. I am not saying that such may not be helpful for landing certain types of jobs (e.g. high tech, high quality).

Um, pardon me, but do you know of ANY jobs that don’t require a solid educational background, including computer basics? I’ve been to China, and seen how they operate. If the United States can’t out produce the crap that China produces, the United States might as well close it’s doors. You can do it. You just don’t want to do it.

I am merely pointing out the historical context that shows that what you are your pointing out doesn’t matter in regards to the exodus of the larger number of jobs that corporations move in efforts to find the lowest cost factors.

Horse manure. I know of several firms that have pulled production back from China, Mexico, Brazil, etc. because those countries have an inability to produce. The only solid reason that corporations have manufacturing jobs overseas, is because of the total lack of pollution regulations in some places. Remember Bhopal?

The point of the matter is, in fact, that education has mattered very little, as the US education system was in a much higher relative position to the countries that the jobs ended up in. I will grant that there is a trade off in quality versus cost – but in that trade-off, quality is almost always second to cost.

The American worker was capable of out producing workers in other countries. That ability is lost in the younger generation, since your school system is falling apart. This is why Canada has been getting so many manufacturing plants (like the huge Honda plant). Our educational system is well funded, our graduates have a solid background. Yours don’t.

If the United States continues to underfund education, it will kill the country. And this is a big problem to me as a Canadian – 95% of my biggest customers are American manufacturers, and they are suffering huge problems finding young talent, because the kids coming out of school don’t have the education that the kids had 15 years ago. This is what they are telling me, and since they are the ones trying to hire (I’ve had a couple of dozen job offers myself from the US). If they can’t get the people they need, they will go elsewhere.

Fix your educational system – bring it up to the level of Canada, or Germany, and you’ll see a huge difference.

Wayne

Blind DogmaJune 8, 2010 11:51 pm

Mad Hatter,

Your answer of “Horse manure” simply ignores the fact that corporations did in fact do as I indicate. You cannot “pull production back” if you never transfered it in the first place. You do not address that critical factor – any ideas how the jobs got there with such disparity in education?

Granted I am not arguing that production does not get pulled back for other reasons such as quality – typically that is a hard lesson to learn and most often corporations will not pull it back, but rather switch to a different low cost country that “promises” better quality (or even lower costs – low enough to make upthe quality difference).

Your anecdotal references to US corporations having difficulty finding quality workers pales to the actuality that US’s unemployed include MANY of those educated more than fifteen years ago.

Education – it makes a great excuse, but little more. But by all means drink another glass of Kool-aid – I sell that flavor too.

The Mad HatterJune 9, 2010 8:40 am

Blind Dogma,

Actually, no it doesn’t. And yes, I know horse manure really well, I grew up on a farm.

As to production pull backs read this which covers a point I’ve been arguing for years, that as the low wage countries grow, their labor costs will rise, as happened in Japan after World War II.

Sure, many of those educated prior to fifteen years ago are hurting, but when you have 20% unemployment that happens. And education isn’t an excuse, it’s the future of your country.

Wayne

Gena777June 9, 2010 4:05 pm

Thank you for making a distinction between NPEs and “patent trolls.” I suspect there’ll be a tussle around the use of those terms for a while, until we have all arrived at a satisfactory definition of “patent troll.” Too many people have used this derogatory term to apply to any entity that does not conduct extensive R&D, or doesn’t manufacture its inventions. But, as GQ opines, the “trolls” are only the bad actors. The problem is that plenty of folks still think that purchasing and enforcing patents in itself constitutes a bad act, instead of a valid and progressive business model. Kudos to the ITC for having the foresight to realize that NPEs are a major wave of the future.http://www.generalpatent.com/media/videos/patent-troll

Blind DogmaJune 10, 2010 8:17 am

Mad Hatter,

You still have not provided an answer as to how those low-education systems obtained the jobs being pulled back in the first place (which defeats your position).

In fact, as you point out with “As to production pull backs read this which covers a point I’ve been arguing for years, that as the low wage countries grow, their labor costs will rise, as happened in Japan after World War II.“the fact that jobs keep moving also works against your position, since one of the drivers away from being a low cost area is that the initially low-education, low wage countries improve their education systems. In this sense, improved education contributes to driving jobs away.

The Mad HatterJune 10, 2010 10:07 am

Blind Dogma,

How does it defeat my position? An educated populace is capable of being employed with lower costs to the company, as less training is necessary. Also an educated populace is capable of being far more productive than an uneducated populace.

Currently workers in China are starting to organize into labor unions (see articles about the Honda strike). This is pushing the cost of manufacturing up in China. Also manufacturing in China has never been as efficient as manufacturing in Japan, Germany, or the United States, so a relatively small cost change can kill the cost advantage.

This of course assumes that the United States maintains it’s educational advantage over China. Japan and Germany have maintained their educational advantage which is one of the reasons that large scale manufacturing still occurs in those countries, instead of driving jobs away like you assume will happen.

Wayne

David KlineJune 10, 2010 10:37 am

I wouldn’t be surprised if education was one of the factors providing for some sort of advantage for manufacturers remaining in Japan, which has the highest corporate tax rates in the world. The U.S. now has the 2nd highest tax rates — but the highest if you add in, say, various state taxes like California’s.

In fact, it’d be fascinating to find some research that quantifies the economic cost-benefit of education in manufacturing operations. Go to Google — or even better, go to economics research site ssrn.com — and type in a search term like “education +manufacturing” and chances are something interesting will show up.

Still, I’d be surprised if education was a bigger factor than tax rates or tax holidays and other incentives in stimulating manufacturing. Former Intel CEO Craig Barrett, testifying at a Senate hearing, said in 2006, “[It] costs $1 billion more to build, equip and operate a [semiconductor] factory in the U.S. than it does outside the U.S. Most of the $1 billion difference is the result of lower taxes combined with capital grants.”

I mean, China’s tax holiday gives exactly as much advantage to manufacturers locating there as does China’s lower labor cost. That is no small advantage! The same goes for Germany”s incentives, and the incentives provided by many other countries.

Blind DogmaJune 10, 2010 1:41 pm

“How does it defeat my position? ”

Let’s take a look at that.

Your position is that jobs will not move from a high quality education place to a low quality education place.

Unfortunately for you, jobs really did move from a high quality education place to a low quality education place. (You have still not refuted this or answered how this happened). The second point was that some of these jobs have since then moved out of the low quality education place. You want to take this second point as confirmation of your position, yet fail to realize that it negates your position (your failing to show the first move). On closer examination, one of the reasons (besides quality simply not meeting expectations) is that the low quality education place, by virtue of its gathering of the business in the first place, raises its standard of living – including its realitive education value – and moves out of the purely low cost zone. When this happens, the business ups and moves to a lower cost zone. In essence, there exacts a correlation between improving educational level and loss of business – no matter what the business will tell you.

The point is not that education is important for some (or certain) jobs. I have never argued that. The point is that what businesses tell you and what they actually do are often too very different things. When they hand you a cup of Kool-aid, you swig it right down without questioning that bitter almond after-taste.

Dale B. HallingJune 14, 2010 11:02 am

Are we talking about net jobs? If we are talking about net jobs, I would suggest the biggest factors (at least for the US) effecting job growth are the strength of intellectual property and the ability to finance new ventures. Workforce education and tax rates are smaller factors. Most education in the US has always occurred outside the formal education system. When there is enough demand for certain skills people will acquire those skills. Tax rates are important to job creation, but almost irrelevant if you cannot protect your IP. Tax rates obviously effect the ability to obtain financing, but the bigger problem in the US today is the regulatory environment that makes it almost impossible to go public. This limits new enterprises to those that can be self financed or financed by a small number of investors.

If we are talking about manufacturing jobs, then it is clear that as the level of technology increases the number of manufacturing jobs will decrease. The point of technology is to reduce the amount of physical labor per product or service. To the extent that the level of education of the workforce is related to level of technology then the number of manufacturing jobs will decrease.

If the concern is the outsourcing of manufacturing jobs overseas, then the best thing that the US can do to hold manufacturing jobs is demand that its trading partners live up to the TRIPS IP provisions. Pat Choate shows in his book Hot Property that the US has lost a large number of manufacturing jobs because of our failure to enforce the TRIPS IP provisions. Because of this failure, our trading partners can steal our technology and get the advantage of low cost labor. This significantly reduces the advantage of manufacturing in the US. However, long term we can expect that US manufacturing output will continue to increase, but manufacturing employment will decrease. This pattern has occurred in agriculture in the US and will repeat in the manufacturing sector unless we completely destroy our economy – a distinct possibility.

The Mad HatterJune 15, 2010 6:23 pm

Dale,

Forget IP (assuming that you can define what IP is) – what matters most is financing. Financial logjams are the biggest problems that expanding businesses face. Without finance, companies don’t expand, and new jobs don’t happen.

Wayne

David KlineJune 15, 2010 6:29 pm

And without patents, startups don’t get financed. It’s usually just that simple, as the USPTO’s David Kappos concedes.

In fact, Google “Patenting by Entrepreneurs,” an empirical study out of Berkeley on why entrepreneurs patent, and you’ll see that about 76% of startups say patents were critical to getting funded.

The Mad HatterJune 15, 2010 7:50 pm

And without patents, startups don’t get financed. It’s usually just that simple, as the USPTO’s David Kappos concedes.

In fact, Google “Patenting by Entrepreneurs,” an empirical study out of Berkeley on why entrepreneurs patent, and you’ll see that about 76% of startups say patents were critical to getting funded.

Hum, what about Microsoft, Google, Myspace, Facebook, Intuit, Yahoo, SalesForce, Redhat, Borland, and Oracle? They all started without patents. You mention that 75% of startups think that patents are critical to getting funding, but you don’t mention that 90% of startups fail, whether they have patents or not.

The critical difference between dead startups and survivors isn’t patents, it’s product. Consider Apple – they moved into the MP3 player market against a lot of competitors with good products, and became the market leader not because of patents, but because they produced the best product.

Wayne

Gene QuinnJune 15, 2010 7:53 pm

Wayne, David and Dale-

For many innovations patents are what is absolutely necessary. Not only does that study demonstrate that, but Dean Kamen, one of the preeminent inventors of our time, emphatically and repeatedly says that without patents you do not get financing.

Not all inventions are that way, so I think the 76% number is about right, perhaps even a little low. Patents are not as important for board games and toys, for example. The race to the market for the holiday season is most important because so many of those have only one cycle in them anyway. To some extent software can be that way, at least if you are thinking small and trying to set up a small service/consulting business. If you think big in software though you need funding and patents can play an important role, but with things like Twitter and Facebook being first matters a lot, right up until Google or Microsoft wants to do it at least.

-Gene

The Mad HatterJune 15, 2010 8:08 pm

For many innovations patents are what is absolutely necessary.

How? None of the companies that I listed used patents, but they grew into giants. Apple is another company that didn’t use patents to grow (though they are using them now to attempt to block competition).

David KlineJune 15, 2010 8:30 pm

Microsoft started out before software patenting was even taking place to any degree. But patents have been essential to their sustaining market share. Same goes for Google and Red Hat, the former of whom is patenting like crazy now — especially in new markets.

For our book, we have interviewed dozens and dozens of entrepreneurzs and venture capitalists, including Larry Roberts, the “father of the Internet” who ran the DARPA internet project out of UCLA. They all said — no, they all insisted without exception — that patents were essential toi getting funding today.

Plus we interv iewed several startups, including one founded by one of the world’s top immunologists who discovered a new treatment for Lupus (Innate Immune) and one with a new wound healing treatment (MatriLab), that went bankrupt or lost promised VC funding for lack of a patent due to the USPTO backlog.

No one is going to invest the money it takes to bring a new treatment to market without some guarantee of exclusivity.

Now, you may not like this. You may not like this, you may wish things were different. But unless you think 76% of the many thousands of entrepreneurs and VCs surveyed are self-destructively delusional, you’ll just have to accept what people in the business say is necessary for funding success today.

David KlineJune 15, 2010 8:33 pm

Here’s the study, Mad Hatter. These are highly-respected academics. It might be worth your while to read it.

You might also want to talk to a wide array of entrepreneurs and VCs active in the business today. If you did, you’d quickly learn what the reality is.

The Mad HatterJune 15, 2010 9:31 pm

Microsoft started out before software patenting was even taking place to any degree. But patents have been essential to their sustaining market share. Same goes for Google and Red Hat, the former of whom is patenting like crazy now — especially in new markets.

How have patents been relevant to Microsoft, Google, and Redhat maintaining market share? Some proof would be nice, especially since Microsoft has been loosing market share steadily over the last five years. I have forecast that Microsoft will been in Chapter 11 within ten years, and I’m not the only one. Google maintains market share not by patents, but by providing a service that is the best on the planet. Redhat is gaining market share by producing an excellent product, and providing tremendous customer service.

Quite frankly patents appear to be a waste of corporate resources, at least for these companies.

For our book, we have interviewed dozens and dozens of entrepreneurs and venture capitalists, including Larry Roberts, the “father of the Internet” who ran the DARPA internet project out of UCLA. They all said — no, they all insisted without exception — that patents were essential to getting funding today.

Ah, but are the essential to a successful business? What advantages do patents give a business? Is the requirement by merchant bankers actually going to help the business, or hinder it?

Plus we interviewed several startups, including one founded by one of the world’s top immunologists who discovered a new treatment for Lupus (Innate Immune) and one with a new wound healing treatment (MatriLab), that went bankrupt or lost promised VC funding for lack of a patent due to the USPTO backlog.

No one is going to invest the money it takes to bring a new treatment to market without some guarantee of exclusivity.

That the VC funding wasn’t available also was a reflection on the product and business plan.

I’ve been through this, and in my opinion the dumbest thing an entrepreneur can do is use VC funding. VC funding comes with so many strings attached, that it can be impossible to operate your business properly.

Now, you may not like this. You may not like this, you may wish things were different. But unless you think 76% of the many thousands of entrepreneurs and VCs surveyed are self-destructively delusional, you’ll just have to accept what people in the business say is necessary for funding success today.

Since 90% of new businesses fail within five years, I’d say that there are a lot of delusional people out there.

Wayne

David KlineJune 16, 2010 10:12 am

It’s amazing to me that anyone could be so certain of his point of view in the absence of any evidence to support it other than his own subjective feelings — and in contradiction to all available evidence.

I suppose I could use up this space to cite long evidentiary excerpts from our book, or from the study I cited (and others I did not).

But somehow I don’t think anything anybody says could ever affect your smug and self-satisfied point of view.

The fact that businesses themselves say patents are essential — and everyone who invests in startups says the same — doesn’t shake your self-certainty. No, you just blithely insist that the $30 million in VC funding that fell through for Innate Immune was a “reflection of the product and business plan” co-invented and co-developed by world renowned Stanford immunologist Sam Strober (you should really google him).

The VCs said that’s not true. The former general council at Affymetrix and Perlegan Science said that’s not true. And USPTO director David Kappos said that’s not true — he actually investigated this case as an example of the damage caused by the patent backlog and testified before Congress about the facts involved in it.

But no, you are just somehow sure that you are right and everyone else is wrong — Kappos, the VCs, the entrepreneurs, the Stanford immunologists, and the guys writing a peer reviewed book for Harvard Business Press.

There’s no discussing the evidence or its meaning with you. It’s like arguing with someone over religion — a waste of time.

You believe what you want to believe and let nothing stand in your way.

Dale B. HallingJune 16, 2010 10:21 am

Mad Hatter,

You can also find many companies where patents were absolutely critical to their success, such as Qualcomm, Xerox, Polaroid, Intel, TI, HP, all Pharmaceutical companies, Genentech, RSA security, etc. If we are discussing whether patents are essential to an individual business, there are many cases where they are not important. However, if we are talking about whether patents are critical to economic growth, there is no question that patents are absolutely critical. Until the advent of the modern patent system technological growth was so slow that people lived in a Malthusian economy, meaning that population expanded until people were on the edge of starvation. Only with the advent of property rights for inventions (patents) were people given sufficient incentive (and justice) to invest in new technology, which is the only way to increase real per capita income. For more information see http://hallingblog.com/2010/05/11/source-of-economic-growth/

The Mad HatterJune 16, 2010 10:38 am

David,

It’s amazing to me that anyone could be so certain of his point of view in the absence of any evidence to support it other than his own subjective feelings — and in contradiction to all available evidence.

What evidence? You haven’t presented any yet.

I suppose I could use up this space to cite long evidentiary excerpts from our book, or from the study I cited (and others I did not).

But somehow I don’t think anything anybody says could ever affect your smug and self-satisfied point of view.

The fact that businesses themselves say patents are essential — and everyone who invests in startups says the same — doesn’t shake your self-certainty. No, you just blithely insist that the $30 million in VC funding that fell through for Innate Immune was a “reflection of the product and business plan” co-invented and co-developed by world renowned Stanford immunologist Sam Strober (you should really google him).

Or to be more correct, you say, that businesses say. You say that VC funding fell through.

What it all comes down to is whether or not I believe you, and I haven’t decided if I should yet.

The VCs said that’s not true. The former general council at Affymetrix and Perlegan Science said that’s not true. And USPTO director David Kappos said that’s not true — he actually investigated this case as an example of the damage caused by the patent backlog and testified before Congress about the facts involved in it.

Again, you say that the VC’s say this. The only independent source you’ve mentioned is David Kappos, and as a director of the USPTO he has an axe of his own to grind.

But no, you are just somehow sure that you are right and everyone else is wrong — Kappos, the VCs, the entrepreneurs, the Stanford immunologists, and the guys writing a peer reviewed book for Harvard Business Press.

Again, all we have is your word as to what these people have said. You have provided no proof that they have really said this.

Another point is that even if these people believe this, it doesn’t mean that it’s true. Gene believes that Climate Change doesn’t exist. Does this mean that Climate Change doesn’t exist? Just about every climate scientist (and maybe all of them) disagree with Gene. So which viewpoint is true?

From a business standpoint VC funding is a pretty stupid path to take. I speak as someone who worked for a firm that nearly made that mistake, and was damned glad that we didn’t (we saw how VC funding killed a competitor of ours).

You say that patents are necessary to get VC funding, which is necessary to operate the business. I say that VC funding is the best way to kill the business, that you should avoid VC funding, and that therefore patents are a waste of time and effort.

Wayne

David KlineJune 16, 2010 10:53 am

Oh come on, man!

I’ve cited names and companies and brief case histories, to which you can add Kathleen Kelleher of Matrilab (profiled in a remarkable series of article by John Schmid at the Milwuakee Sentinel last year).

If I cited their actual quotes and put little quote marks around them, you wouldn’t believe that either. You’d say, “How do I know the quotes aren’t made up?” and then ask for the digital tape recordings to be posted.

And so on and so on.

Don’t kid a kidder, pal. You’ve let your own experience and that of your one company color your entire view about the role of patents in funding.

In contrast, I’ve spent thousands of hours researching and listening to people from many dozens of companies describe their need for patents, and I’ve spent many more hours in addition pouring through the empirical research on the experiences of many thousands of entrepreneurs and VCs on this same issue.

They all agree: you are wrong.

So pretend you were me: Who would you trust has the best and most credible evidence — some guy named Mad Hatter with no serious research, or the CEOs, investors (and not just VCs, btw), the peer-reviewed authors and especially the peer-reviewed researchers who say Mad Hatter is dead wrong?

Really, who would you believe?

Gene QuinnJune 16, 2010 11:10 am

Wayne-

Let’s keep it real. You know or should know that I do not deny climate change. We have gone around and around about this and the fact that there is and always gas been climate change bolsters my position that global warming alarmist are ignoring scientific facts.

There has been tremendous temperature changes throughout history and the ice core data confirms this. It has been warmer at times than it has been over the last 50 years, all periods that humans dud nit exist. The data proving global warming was fabricated and the raw data discarded.

You want to characterize my correct factual views as extreme, but first you need to misrepresent, and that is intellectually dishonest.

The climate is changing and as much as you hate it there is no scientific proof that it is anything other than natural. Long before msn and fossil fuels deserts were plush growing lands that turned to uninhabitable. We have gone through numerous ice ages and thaws, which necessarily means vast cooling and warming, the last at the dawn if modern humans but with no foss fuels.

Climate change is natural and anecdotes about polar bears and glaciers is not scientific proof of anything other than climate change, not global warming caused by man.

As for VCs, believe what you want, but everyone seriously engaged in the industry, whether attorney, inventor, entrepreneur or business person knows that without patents there us no sustainable competitive advantage and that means no funding.

The way to have a debate around any issue, including global warming, is to offer opposing arguments based on available facts and evidence.

(Althougfh I personally suspect that a significant portion of warming is man-made, I also know that Gene is not unreasonable in supposing otherwise.)

But just as they say “you’re entitled to your own opinion but not your own facts,” its also true that “you’re entitled to your own opinion but not if it’s based on ZERO facts and evidence.”

To keep insisting as you do, Wayne, that “No, no, I don’t believe patents are useful or necessary!” despite the volumes of published and cited evidence to the contrary — and then to have absolutely no evidence at all to support your own views other than your personal feeling — is simply not credible.

Gene QuinnJune 16, 2010 12:24 pm

I agree with David. Debates need to be fact based. That has been my grip over global warming. The agenda pushed by some ignores facts tot he contrary and vilifies dissent. It prevents thorough airing of both sides of the issue. What if global warming is NOT man-made? Then we have wasted the past 30 years, and that is a sin.

I see the same thing in patents. Emotion and anecdotes drive the debate because most people, rightly so, are suspicious and predisposed against monopolies. A patent right is not a monopoly for many reasons, but it does provide exclusive rights that can be used to create a monopoly, so there is justified desire to make sure that we doing the responsible thing.

In some areas patents do not matter as much, and in some areas (i.e., biotech) they are all that matters. That is why focusing on anecdotes does not help. Full consideration of the totality of the circumstances is necessary, and like it or not, justified or not, good, bad or ugly, VCs overwhelmingly want to see patents and understand what your patent strategy is and why it will provide a competitive advantage. No one wants to spend $2-5 million on a first VC round only to learn that others will compete without the need to recoup development costs. VCs are always looking for exist strategies, and without a patent portfolio you eliminate one exist strategy. If everything turns south, with a patent portfolio at least you have assets to sell to recoup something. With a patent portfolio you can focus on core and license non-core to generate additional revenue. With a patent portfolio you have insurance against being sued for patent infringement (i.e., the counterclaim). With a patent portfolio you can make it difficult for competitors to compete without crossing the bridge and accepting the risk and perhaps inevitability of a patent infringement lawsuit. So a patent portfolio is very attractive to VCs.

I think there is a broader article here!

-Gene

David KlineJune 16, 2010 12:40 pm

>> “Emotion and anecdotes drive the debate because most people, rightly so, are suspicious and predisposed against monopolies.”

Over the years, I’ve collected historical quotes on IP. The last “great debate” over whether patents were a social good or not took place about 150 years ago. So it seems appropriate, amidst today’s debate over IP, to offer a few of these quotes:

“The condemnation of monopolies ought not to extend to patents, by which the originator of a new process is permitted to enjoy, for a limited period, the exclusive privilege of using his own improvement. This is not making the commodity dearer for his benefit, but merely postponing a part of the increased cheapness (or excellence) which the public owe to the inventor, in order to compensate and reward him for his service.”

John Stuart Mill, “Principles of Political Economy,” 1848

“The dawn of the right of inventors has been actually [contemporaneous] with the destruction of monopolies odious to the common justice of men; and the common sense of mankind has marked a distinction between such monopolies and the exclusive rights conceded to inventors. Their rights, under patents, are called ‘monopolies’ only from the poverty of language, which has failed to express in words a distinction which no less clearly exists.”

“How can the exclusive right of an invention be compared with a monopoly in trade? How can the exclusive privilege to sell salt in Elizabeth’s time, which added not one bushel to the production, but which enriched the monopolist and robbed the community, and the exclusive right of Whitney to his cotton gin, which has added hundreds of millions to the products and exports of the country, be both branded, with equal justice, with the odious name of monopoly?”

George H. Knight, 1891

“Is it reasonable to make a man feel as if, in inventing an improvement meant to do good, he had done something wrong?”

Charles Dickens

The Mad HatterJune 16, 2010 2:52 pm

David,

So what you are saying is that I should ignore my own experiences, in favor of your book? Sorry, I’m not willing to do that. I am extremely skeptical of your arguments. What you are producing as proof is opinion only. Sure, the people you have spoken to believe that they need patents, but a belief is not a truth. And you don’t appear to have conducted a peer reviewed study, which is what I would expect to see, in a book of this nature.

One problem that we have is that there are no peer reviewed studies proving that the patent system is in compliance with the Constitution. And until someone does one, we don’t know if it works the way it is supposed to. It may, or it may not. We don’t know. Me, I’m skeptical about this. Everyone says it does, but the only proof that is offered is anecdotal.

And for Gene, Dale, and the others who didn’t like my statement on Climate Change,

I suspect that none of you have meet David Brin. I have, and the man is scary intelligent. Also what he is saying matches what I know of from my dealings with scientists at the Environmental Protection Agency, the California Air Resources Board, and Environment Canada, as well as scientists at Delphi, Umicore, Corning, Johnson Matthey, and Engelhard. While I am not a scientist myself, I have the background to evaluate what these people have told me. All of them agree – humans are having a huge effect on the Climate of the Earth, and if we don’t make changes fast, we will be in big trouble. Thankfully a lot of people agree with me, which is why I suggested recently that it would be a good idea to sell off your shares in fossil fuel companies.

Wayne

David KlineJune 16, 2010 4:04 pm

“All of them agree – humans are having a huge effect on the Climate of the Earth, and if we don’t make changes fast, we will be in big trouble. Thankfully a lot of people agree with me,”

Wow, funny how the informed opinion of recognized authorities (combined with scholarly research) is good enough for you when it comes to global warming, but somehow inadequate when it comes to something you do NOT wish to believe — i.e., that entrepreneurs find patents vital to their funding and their businesses.

Could there perchance by some subjectivity or even narcisism involved in giving more weight to your one personal experience and your subjective opinions than to the opinions of virtually all serious scholars on patenting by businesses or to the research on entrepreneurial businesses themselves.

(Btw, we never claim that patents are important to all businesses — just that most startups find them valuable or necessary in financing and other areas needed for business success.)

As for the question of peer review, you are (unsurprisingly) wrong again. If you had bothered to look at the study I cited and the article based on it, you would know that it is, in fact, peer reviewed.

As for our own book, we are not academics. My coauthor is a veteran serial entrepreneur who built six startups in his 35-year career into industry leaders — selling his last startup to Microsoft for $500 million two years ago. As a journalist, I am a Pulitzer Prize finalist who also wrote the most widely-praised and, in fact, successful book on patenting in business ever published, “Rembrandts in the Attic.”

But despite the fact that we are not academics, our manuscript will also be peer reviewed by a panel of Harvard-selected economists, thought leaders and business executives to ensure that the book makes credible arguments based on valid evidence and research rather than subjective belief or pure speculation.

So just as you do when it comes to global warming, the readers of this blog will certainly make their judgements based on who is the most credible source and who offers the best evidence for his opinion.

I doubt many people will find your evidence-free subjective beliefs very convincing.

Dale B. HallingJune 16, 2010 4:29 pm

Wayne,

You are clearly not interested in facts, logic, or reason. Your only evidence is anecdotal and when confronted with anecdotal evidence of the opposite you ignored it. When you are confronted with macroeconomic evidence you ignore it and provide neither evidence or logic to rebut it. When confronted with studies of start-up business and VC, you do not rebut it with your own evidence, you do not point out any flaws in the study, you just complain that you want a “peer reviewed” study. Clearly, you are believe that your feeling are more important that facts and reason.

When you made the outrageous statement that the all climate scientists agree that there is anthropomorphic Global Warming, I pointed you to evidence to show you were incorrect. Instead of admitting that this statement was incorrect, you point to your association with David Brin. This in no way makes your earlier outrageous statement correct. This discussion is not about the scientific validity of anthropomorphic Global Warming, its about whether patents stimulate economic activity. You brought up Global Warming and I was just pointing out that your statement was clearly incorrect.

Perhaps you believe this is a theological debate and the strength of your faith (or your good intentions or feelings) in your position is what matters. But, this is not a theological debate is a debate about the real world based on reason and evidence. Please provide some.

Blind DogmaJune 17, 2010 7:45 am

Gentlemen,

You really should notice that the flavor of the Kool-aid was upgraded from Global Warming to Climate Change. Certain people knew it was only a matter of time that the “warming” argument would turn cold, and since the only constant is change, that the mantra of Climate Change would be unassailable.

Gene,

One suggestion for your blog – Can you create a “recent comments” section? I have missed the developing conversation here since the thread went to “page 2”. I have not fully caught up, but I have noticed that the Mad Hatter has been hoarding the pitchers of drink I have provided. I will be providing more so that others can also share the passion for my bounty.

David KlineJune 17, 2010 3:47 pm

Dear Blind Dogma,

I appreciate the offer of extra cool-aid. But honestly, I think we’ve got more than enough here already.

David Kline – Patenting by Entrepreneurs is an interesting study, however the entire study is anecdotal. There is no attempt at a cost-benefit breakdown either for the company with the patent, or for society, which limits the usability of the study. What are the economic benefits? We do not know. We do know that a lot of people believe that patents are important, but belief is not truth.

Dale Haling – I’d read this post of your previously. You do not take into account the wide spread adoption of the printing press a century or two previously, which preserved knowledge in accessible format for future generations. You also don’t take into account the inception of the modern education system (FYI – I am writing a book about this) which means that a wider proportion of the population were given the tools needed to make improvements. You don’t take into account the spread of the scientific method, which gave scientists the tools they needed to expand the knowledge of natural laws. In my opinion your theory is simplistic, and therefore suspect.

Gene Quinn – Gene, my understanding was that you do not believe that mankind has any effect on Climate, and I disagree with that position. I know a lot of people who agree with you, including some very close friends of mine. It makes talking to them interesting some times 🙂

Wayne

Blind DogmaJune 18, 2010 11:43 am

I feel left out – Wayne, you forgot about our discussion on the movement of jobs and education levels.

Dale B. HallingJune 18, 2010 11:58 am

Mad Hatter,

The movable type printing press was invented around 1440 and the Chinese had invented the non-movable type printing press at least 500 years before that. So the printing press in no way coincides with the growth of per capita income.

Simplistic?: Funny Occum’s razor states that the simplest explanation consistent with the facts is usually correct. You comment that my post is simplistic is not an argument, just a flippant remark that adds nothing to the discussion.

Scientific Method: Clearly you cannot have increases in technology without reason or more narrowly the scientific method. However, the basics of the scientific method were understood by Aristotle and clearly known by Europeans at the time of Francis Bacon (1562-1626). This was over 200 years before the sudden take off of per capita incomes. Again your timeframes do not match up.

Modern Economics: It is well known in modern economics that technologic growth is the only way to increase real per capita income. A patent system is the only free market system of encouraging people to invest in inventing new technologies. The facts coincide very nicely with the advent of increasing technology that results in increase in real per capita income and the advent of the modern patent system. This is not simplistic, it is logic and evidence.

The Mad HatterJuly 5, 2010 3:53 pm

Blind Dogma,

Sorry – been in bad shape lately, in fact since the last time I posted here I’ve been declared legally disabled. In regards to education, see my comment above to Dale, and my further notes below.

Dale,

Occam’s Razor is useful in some circumstances, but it can lead to error, when you leave out data. I mentioned the printing press, and you pointed out that it had been invented hundreds of years before. But just because something has been invented doesn’t mean that it’s effects have been felt fully. Until literacy was wide spread, the printing press couldn’t have full effect. Wide spread literacy didn’t occur until publicly funded schooling for all citizens became common.

Your study, which showed a connection between patent rights and economic growth didn’t take into account the events in Canada, which showed similar economic growth to what occurred in the United States, without the same patent laws. In Canada, the huge jump in economic growth is considered to be a function of the implementation of public education, which is why I considered you study to be simplistic. You considered only one reason for the large scale economic growth, in one country. You might be right in regards to the United States, but in Canada you wouldn’t be right.

Wayne

Blind DogmaJuly 6, 2010 7:19 am

Mad Hatter,

Get well – nothing sucks as bad as bad health.

As to the pro-Canadian rants…
They are not compelling. Canadians are enjoying the distant coattails of earlier US productivity – nothing more. They have never been leaders – only third tier followers. Nothing wrong per se with this – they do manage to avoid some of the leadership pitfalls, but don’t mistake the benefits they enjoy with their own actions. Focus on the language split and other cultural dichotomies first (well, second – after your health).

Dale B. HallingJuly 6, 2010 12:39 pm

Wayne,

Canadians could avail themselves of British patents and US patents.

As to the printing presses effects showing up 300+ years later, it does not show an incentive to invent only to spread information. There is ample evidence (if you open your eyes) that the rate of invention is directly related to the incentives to invent. Patents do not function in a vacuum, but are the critical legal structure necessary for a high rate of invention. You have not provided any reasonable alternative explanations. Most critically, your alternatives do not show an economic incentive for inventing.

The Mad HatterJuly 6, 2010 7:21 pm

As to the printing presses effects showing up 300+ years later, it does not show an incentive to invent only to spread information. There is ample evidence (if you open your eyes) that the rate of invention is directly related to the incentives to invent. Patents do not function in a vacuum, but are the critical legal structure necessary for a high rate of invention. You have not provided any reasonable alternative explanations. Most critically, your alternatives do not show an economic incentive for inventing.

I agree and disagree. The highest rate of innovation in software occurred before software became patentable, so I’m convinced that patents had nothing to do with the innovation rate. Monetary compensation on the other hand definitely did have an impact on the innovation rate – the economic incentives for innovation had nothing to do with patents, but instead to do with sales.

Consider Microsoft. The company spends an incredible amount of time and money on patents, but since they have started doing that their overall profitability has dropped, and the number of successful innovations has also dropped, even though they are spending more than ever on R&D. At the same time Apple has introduced a wide range of successful new products, while spending far less on R&D.

Curiously the greatest centers for innovation are Free Software projects, which have passed both Microsoft and Apple technologically, even if they don’t hold anywhere near the market share levels. Economically Free Software projects do very well indeed. But they don’t use patents. They don’t need to, to take advantage of the economic incentives for inventing.

Wayne

PS: As to the printing press and the delayed payback, the same situation occurred with the steam engine, which existed for over 2000 years before is became a practical device.

David KlineJuly 6, 2010 7:56 pm

“Consider Microsoft. The company spends an incredible amount of time and money on patents, but since they have started doing that their overall profitability has dropped…”

C’mon Mad Hatter, you’re smarter than this!

Microsoft’s overall declining profitability as a mature company rather than a startup has everything to do with its mature products and nothing to do with patenting. It’s not a causal relationship and you surely know that.

Here are the facts:

Even though Microsoft started getting hit with extremely damaging and costly patent suits in the early 1990s, they themselves didn’t start patenting heavily until the early 2000s because prior to that they employed a Non-Assertion of Patents (NAP) clause on all companies in the Windows ecosystem. The industry resented the NAP clause deeply, however, and the Japanese even raided their Tokyo offices in search of NAP-related evidence of monopoly behavior.

When Marshall Phelps took over the IP function in 2003, he convinced the company to drop the NAP clause, which had severly damaged its industry relations, and instead develop a large patent arsenal with which they could instead negotiate large-scale cross licenses with other firms (especially Japanese consumer electronics firms). Only when Microsoft had an IP portfolio of significant value did Toshiba, NEC and others negotiate cross licenses.

Microsoft needed an IP portfolio of sufficient size to get those those cross licenses with the electronics giants. And it needed those cross licenses to serve as their insurance against an onslaught of patent infringement suits once they abandoned their previous NAP clause defensive strategy.

Even with the 600 patent license deals they have negotiated since 2003, they still spend between $75 million and $100 million a year in defending against infringement suits — a fair number of these brought by real trolls.

Microsoft has always used its patents as defensive tools and as the currency for collaboration agreements, rather than as offensive weapons or as a source of licensing revenue. They are one of the least litigious companies in the field, as even Red Hat has stated, and have probably only filed a few infringement suits against ither firms in their entire history — most in the last two years since Phelps left.

Asa for supposedly using their patent arsenal as “toll booths” or a tax on other players, again, they earn less in patent licensing revenue than almost any other major firm such as HP and less than one tenth of what IBM earns each year. In the last five years, Microsoft has also spent orders of magnitude more to license in other companies’ patents than they have ever earned from licensing their own.

Microsoft does enough dumb stuff that you really don’t need to make garbage like this up just to try to prove your larger points about the patent system.

Nor do they use them very much

Dale B. HallingJuly 7, 2010 10:59 am

Wayne,

You are wrong about software and patents. Software made its biggest advances once it once clear that it was patentable. There are numerous academic papers on point.

Incentives matter and the printing press, steam engine, etc. do not provide an incentive to invent, and they don’t correlate well.

The Mad HatterJuly 7, 2010 7:53 pm

Dale,

As a programmer, who predates Microsoft’s founding, I’ll disagree with you about software advances.

As to the printing press, steam engine, etc., I didn’t say they were incentives to invent, I said that they were inventions that didn’t have their full effect until many years after they’d been invented. What does correlate with invention is financial gain. The companies with the most patents don’t show the most innovation or financial gain. Compare Microsoft, and the disaster that is the XBox360, or the KIN phone, with Apple, who produces far less in the way of patents, but actually produces products that people are willing to pay more for. Microsoft ‘invented’ the tablet PC, but could never convince anyone to buy them in quantity, Apple made the tablet PC (IPad) into a financially viable product.

Just the same as Apple made the Smart Phone (IPhone) into a hot product, while Microsoft’s share of the smart phone business is dying.

Patents mean nothing. Execution means everything. If you aren’t capable of designing a product that customers want to buy, it doesn’t matter how many patents you have, you won’t survive. Microsoft is currently in the same position General Motors and Chrysler were in 7 years ago, and in 5 years I expect Microsoft to be applying for Chapter 11.

Wayne

The Mad HatterJuly 7, 2010 7:57 pm

David,

I don’t recall saying that Microsoft was launching patent lawsuits – where did you get that from? What I said was that there patents were costing them more than they were gaining from them. See my note above to Dale.

Wayne

David KlineJuly 7, 2010 8:06 pm

“Patents mean nothing. Execution means everything. ”

Why do you have to take such an absolutist and binary position?

Patents mean something, while at the same time you can still get hurt bad even with good execution.

Just ask Blackberry.

Or Kodak, which infringed Polaroid’s technology 20 years ago and had to pay $925 million in damages, shut down its instant camera factory ($3 billion), and spend $500 million to buy back all the cameras they sold.

Why do so many people think that a thing — patents, for example — is either all good or all evil, totally and always eswsential or completely useless?

They’re never completely useless. Just ask Stac Electronics (or Microsoft, which had to pay Stac hundreds of millions).

Or just ask Microsoft, which uses them to sign cross license deals that give it access to technology it doesn’t have and entry into markets it could never operate it without the cross license.

At the same time, getting a patent for a technology or product nobody wants will leave with what exactly? A product nobody wants.

There must be a mental defect involved when people are so unable to see any shades of grey or nuance.

All good, or all bad. Is that how you really think about things?

David KlineJuly 7, 2010 8:11 pm

No, to repeat — this is what you said:

“Consider Microsoft. The company spends an incredible amount of time and money on patents, but since they have started doing that their overall profitability has dropped…”

If you suggest that Microsoft has become less profitable becauser it started patenting, please provide evidence that patenmting in any way caused that decline in profitability.

Otherwise you’re just blowing smoke and implyingh a correlation, if not causation.

Might as well just have said that ever since Bill Gates turned 50, Microsoft’s profitability has declined.

I don’t think anyone with any brains would buy that aging was the cause of MS’s decline, and they won’t buy your notion that patenting is the cause — unless you can come up with evidence for it.

Please don’t talk to people like they’re children here.

The Mad HatterJuly 7, 2010 8:13 pm

David,

I didn’t say you couldn’t get hurt. I said that execution (product design and marketing) has a bigger effect on sales than patents. Think IPad vs Tablet PC. Apple’s execution is excellent.

Wayne

The Mad HatterJuly 7, 2010 8:24 pm

No, to repeat — this is what you said:

“Consider Microsoft. The company spends an incredible amount of time and money on patents, but since they have started doing that their overall profitability has dropped…”

If you suggest that Microsoft has become less profitable becauser it started patenting, please provide evidence that patenmting in any way caused that decline in profitability.

Otherwise you’re just blowing smoke and implyingh a correlation, if not causation.

I am implying a correlation. I think that the company has lost focus.

Might as well just have said that ever since Bill Gates turned 50, Microsoft’s profitability has declined.

Good one – I’ll have to use that.

I don’t think anyone with any brains would buy that aging was the cause of MS’s decline, and they won’t buy your notion that patenting is the cause — unless you can come up with evidence for it.

I think that Microsoft is wasting a lot of resources on something that isn’t bringing them a good rate of return. Again compare them to Apple…

Please don’t talk to people like they’re children here.

When did I do that? I will admit that I don’t back down, and that I’ve never considered this a popularity contest. And yes, I’m direct, and somewhat cantankerous on the best of days. But treating people like children? When?

Wayne

David KlineJuly 7, 2010 8:30 pm

>> I said that execution (product design and marketing) has a bigger effect on sales than patents.

Why are you lying? It’s right there for all to see. You said “Patents mean nothing. Execution means everything.”

Only when I called you on your absolutism did you then say that execution “has a bigger effect on sales than patents.” Which of course anyone would agree with since it’s true in many if not most circumstances.

“I think that Microsoft is wasting a lot of resources on something that isn’t bringing them a good rate of return.”

Can you tell me what their rate f return was when they had no cross licenses and no defense against patent infringement suits? I can tell you that Sony sued them for $1 billion and they settled for $400 million in 2003,

Have you analyzed all their other expenses — sales, marketing, R&D — against their return? Because I’m fascinated with how you are so certain that the measly $100-$200 million they spend a year on patenting is the biggest factor in their woes.

I mean, they bought Danger for $500 million in 2008, probably put another billion into developing the Kin phone, which they just shut down last week.

Obviously patenting is just pipsqueak stuff compared to their costs of failed product developmengt, inadequate understanding of the market, etc.

I tthink people can seev that your assumptions come entirely out ofn your own head with no basis in reality. In fact, I’m sure you never even analyZed all their costs versus returns.

You just blamed it on patenting and assumed no one would call you on your bluff.

The Mad HatterJuly 8, 2010 6:35 am

David,

First a question – do you read Apple’s and Microsoft’s financial reports? If you don’t, your responses to my comments about profitability of operations have no basis.

I said that execution (product design and marketing) has a bigger effect on sales than patents.

Why are you lying? It’s right there for all to see. You said “Patents mean nothing. Execution means everything.”

And that’s true. Execution does mean everything. While Microsoft had the first patents on tablet PC computing, they never did produce a product worth buying. Apple did. We have a 64gb IPad in our home, and it’s an incredibly well designed device. Microsoft patented. Apple executed. If you want to argue that Microsoft made more money on tablet PC devices than Apple did on IPads, go ahead, but I’d like to see some documentation to back up your statements.

Only when I called you on your absolutism did you then say that execution “has a bigger effect on sales than patents.” Which of course anyone would agree with since it’s true in many if not most circumstances.

“I think that Microsoft is wasting a lot of resources on something that isn’t bringing them a good rate of return.”

Can you tell me what their rate f return was when they had no cross licenses and no defense against patent infringement suits? I can tell you that Sony sued them for $1 billion and they settled for $400 million in 2003,

Yes, and Eolas sued them for umpteen million, and so did everyone else. The problem with your argument is that you have been claiming that patents are a necessity for innovation, but Microsoft doesn’t use it’s patents for innovation, they use them defensively for the most part, with a few offensive lawsuits such as that against TomTom. Defensive patent use has nothing to do with innovation. New inventions which lead to products are the point of innovation, again, look at Apple, which introduces new products which people are willing to buy, as compared to Microsoft who apparently sold no more than 20,000 of their highly hyped KIN phone.

Have you analyzed all their other expenses — sales, marketing, R&D — against their return? Because I’m fascinated with how you are so certain that the measly $100-$200 million they spend a year on patenting is the biggest factor in their woes.

I mean, they bought Danger for $500 million in 2008, probably put another billion into developing the Kin phone, which they just shut down last week.

Obviously patenting is just pipsqueak stuff compared to their costs of failed product developmengt, inadequate understanding of the market, etc.

Yes, I have anazlyzed their other expenses from reading their 10Q and 10K SEC filings. These filings show a definite trend downwards in profitability since they started patenting everything and it’s mother. In my mind the purchase of Danger, and it’s subsequent gutting (did you hear about the server crash which took all of the Danger phones offline?) is related.

I think that someone at Microsoft believes that IP is more important than building a product that customers want to buy. And that the sales department should just sell what development provides, without complaining. Remember, I have friends who work there, and I end up hearing things from them about how the firm is operated, things that confirm what the Mini Microsoft blog has been saying for years. Read Mini’s take on the KIN Disaster where he makes some really interesting points about product development/R&D did wrong, and how it wasted millions (maybe billions) of dollars. Of course they still have the patents they applied for on this, so according to you they are ahead.

Funny, it doesn’t look like they are ahead to me.

I tthink people can seev that your assumptions come entirely out ofn your own head with no basis in reality. In fact, I’m sure you never even analyZed all their costs versus returns.

You just blamed it on patenting and assumed no one would call you on your bluff.

I wish that you would read what I’ve written (I also wish you would turn on your spell checker – it’s damned hard to figure out what you are saying with some of the spelling mistakes). Let’s look at what I said:

Consider Microsoft. The company spends an incredible amount of time and money on patents, but since they have started doing that their overall profitability has dropped, and the number of successful innovations has also dropped, even though they are spending more than ever on R&D. At the same time Apple has introduced a wide range of successful new products, while spending far less on R&D.

First, is there anything in this statement that isn’t accurate? Let’s simplify what I said a bit:

1) Does Microsoft spend a lot of money on R&D, and filing patents?
2) Does Apple spend considerably less?
3) Hasn’t Microsoft’s profitability shown a slow but steady decline over the last five years?
4) Hasn’t Apple’s profitability shown a slow but stead increase over the last five years?

Are any of those four statements incorrect, and can you prove this using the 10Q and 10K statements of the two companies? Please bear in mind that Microsoft is attempting to hide the problems, by changing how they do their annual reporting. That is a danger sign in and of itself. Changing reporting practices is an admission that the problems have gotten bad enough that they are very concerned.

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

I would love to hear your argument as to how defensive patenting promotes the Progress of Science and useful Arts. In fact it could be argued that the defensive use of patents is unconstitutional. When you read the original wording, it is clear that the founders did not intend Patents, Copyrights, or Trademarks to be used defensively. Instead they were to be used only to reward the inventors, to promote ‘Progress’.

Wayne

PS: Yes, it is that early. I woke up in enough pain that there was no way I would be able to get back to sleep. Maybe in another hour or two I’ll manage…

The Mad HatterJuly 8, 2010 7:30 am

I said that execution (product design and marketing) has a bigger effect on sales than patents.

Why are you lying? It’s right there for all to see. You said “Patents mean nothing. Execution means everything.”

Only when I called you on your absolutism did you then say that execution “has a bigger effect on sales than patents.” Which of course anyone would agree with since it’s true in many if not most circumstances.

Actually I haven’t. Patents mean nothing. Without execution they are useless.

“I think that Microsoft is wasting a lot of resources on something that isn’t bringing them a good rate of return.”

Can you tell me what their rate f return was when they had no cross licenses and no defense against patent infringement suits? I can tell you that Sony sued them for $1 billion and they settled for $400 million in 2003,

Have you analyzed all their other expenses — sales, marketing, R&D — against their return? Because I’m fascinated with how you are so certain that the measly $100-$200 million they spend a year on patenting is the biggest factor in their woes.

I mean, they bought Danger for $500 million in 2008, probably put another billion into developing the Kin phone, which they just shut down last week.

Obviously patenting is just pipsqueak stuff compared to their costs of failed product developmengt, inadequate understanding of the market, etc.

I tthink people can seev that your assumptions come entirely out ofn your own head with no basis in reality. In fact, I’m sure you never even analyZed all their costs versus returns.

You just blamed it on patenting and assumed no one would call you on your bluff.

Go back and read it – I didn’t blame it all on ‘patenting’. Several people here have made statements that could be interpreted to mean that:

1) Without patents no one would invent.
2) Without patents no one would get a payback on their invention.
3) Without patents no new products would enter the market.

My arguments are that these statements are incorrect. One of the companies that is most heavily patenting ideas to protect their ‘Intellectual Property’, Microsoft, has shown a total inability to do anything with the ideas that they are patenting. I then used Apple as an example of a company who can produce new products and ideas.

Microsoft files and receives many more patents than Apple, therefore Microsoft should be introducing more new and innovative products than Apple according to your arguments. However the reverse is true. How do you explain this?

Wayne

David KlineJuly 8, 2010 10:19 am

>> 1) Without patents no one would invent.
>> 2) Without patents no one would get a payback on their invention.
>> 3) Without patents no new products would enter the market.

Bull. Who said the above? No one did. Again, it’s you making up stuff in your head. It is YOU who have inserted the phrase “no one” into those sentences because, like a child, you try to exaggerate the point others are making in order to try to discredit them. It is YOU who are afraid of dealing with your opponents’ arguments honestly.

Look, let’s use marriage as an analogy. Most people find marriage valuable. Most people find marriage to be a good incentive for settling down and raising kids. And without marriage, many people wouldn’t have kids or raise families.

Does that mean that without marriage NO ONE would have kids? Even in the 1950s, that wasn’t true and no one would ever say it was.

Except you, because you’re so intellectual dishonest you try to claim that’s what people are saying.

Do you really think people are that stupid here?

And as for this little gem of yours:

>>” Microsoft files and receives many more patents than Apple, therefore Microsoft should be introducing more new and innovative products than Apple according to your arguments.”

Let’s just say that you couldn’t run that infantile statement through a high-school logic class.

Really, man, unless you grow up and show some honesty and cojones in your arguments, I’m not going to respond to your childish twisting of other people’s statements anymore.

David KlineJuly 8, 2010 12:17 pm

“Yes, I have anazlyzed their other expenses from reading their 10Q and 10K SEC filings. These filings show a definite trend downwards in profitability since they started patenting everything and it’s mother. In my mind the purchase of Danger, and it’s subsequent gutting (did you hear about the server crash which took all of the Danger phones offline?) is related.”

Unfortunately, you have just stepped in a pile of your own hubris, because I happen to be writing a book with the CEO of Danger, Hank Nothhaft. That’s right, I work every single day with the sucvcessful entreprepreneur who led Danger to a huge $500 million acquisition by MS — and who has built 6 successful companies in his 35-year career.

He knows what happened to Danger. I know. But you don’t, except for maybe a couple of tidbits here and there which you have unwisely used here to claim authoritative knowledge..

What you don’t know (or have conveniently forgotten to mention) is that this truly wonderful groundbreaking company called Danger had over 100 patents (50 issued and 50 pending) when MS bought it. Danger had a great reputation and a great product (SideKick) that was innovative and groundbreaking for being the first to offer a great user experience with messaging and social networks. Their patents, according to people I know who worked with and even led the company, were critical to their being able to develop their standing and position in the market — as well as to making them worth $500 million to MS.

So yes, I read that MiniMicrosoft blog and, of course, it’s a sad story of how groundbreaking innovations and great companies get swallowed up and killed inside big firm like Microsoft.

Hank has told me of the many emails he is now receiving from former Danger-turned-Microsoft employees explaining how awful it was and what happened. I also know that the Danger team, having gotten their 2 year retentionm bonmuses now, are leaving MS in swarms for Google, Apple and other great companies, where their skills and reputations as ex-Danger employees is much valued and admired. And

It hardly needs to be said that included among these highly-valued people are individuals who helped get many of Danger’s equally-admired patents. Or that Apple and Google are both extremely active patentees, filing almost constantly for new patents.

It is of course true that MS bought Danger and killed it through gross incompetence. You claim it’s because MS is patenting. Bull! Name one single patent that the company got that had anything to do with Danger or Kin. Tell me exactly how patenting slowed down and destroyed the great innovations that Danger developed WITH patenting.

You can’t. You make a blanket statement that in general, MS’s dfecline began in the same TIME PERIOD as the company began patenting. But you don’t even know where MS did the bulk of its patenting (although I do), or whether any of those patents had anything to do with particular product failures.

The one thing we both agree on is that patents won’t help a dumb company.

But then not one single person here ever claimed they would.

David KlineJuly 8, 2010 12:24 pm

It is no longer productive to debate these issues with someone as intellectually dishonest as you.

Blind DogmaJuly 8, 2010 12:55 pm

It is painfully obvious that the Mad Hatter knows very little about law, legal arguments and the patent system. Wayne, your personal knowledge blinds you from accepting things that you do not want to accept. No amount of “facts” or argument will break through that shield and you will forever not understand the patent arena, blocked by yourself.

While I appreciate all the Kool-Aid you buy from me, like a good bartender, I have to cut you off because you do not recognize your drinking problem.

The Mad HatterJuly 8, 2010 4:12 pm

>> 1) Without patents no one would invent.
>> 2) Without patents no one would get a payback on their invention.
>> 3) Without patents no new products would enter the market.

Bull. Who said the above? No one did. Again, it’s you making up stuff in your head. It is YOU who have inserted the phrase “no one” into those sentences because, like a child, you try to exaggerate the point others are making in order to try to discredit them. It is YOU who are afraid of dealing with your opponents’ arguments honestly.

Note that I said ‘Could be Interpreted to mean.”

Look, let’s use marriage as an analogy. Most people find marriage valuable. Most people find marriage to be a good incentive for settling down and raising kids. And without marriage, many people wouldn’t have kids or raise families.

Does that mean that without marriage NO ONE would have kids? Even in the 1950s, that wasn’t true and no one would ever say it was.

Agreed.

Except you, because you’re so intellectual dishonest you try to claim that’s what people are saying.

Do you really think people are that stupid here?

Except that what you say I said, isn’t what I said.

And as for this little gem of yours:

>>” Microsoft files and receives many more patents than Apple, therefore Microsoft should be introducing more new and innovative products than Apple according to your arguments.”

Let’s just say that you couldn’t run that infantile statement through a high-school logic class.

Let’s go back to the start. There is a general agreement among most people on this board that patents are important for innovation. I used Microsoft as an illustration of a company that has a lot of patents, but is unable for whatever reason to innovate.

Really, man, unless you grow up and show some honesty and cojones in your arguments, I’m not going to respond to your childish twisting of other people’s statements anymore.

Pot calling the kettle black David.

“Yes, I have anazlyzed their other expenses from reading their 10Q and 10K SEC filings. These filings show a definite trend downwards in profitability since they started patenting everything and it’s mother. In my mind the purchase of Danger, and it’s subsequent gutting (did you hear about the server crash which took all of the Danger phones offline?) is related.”

Unfortunately, you have just stepped in a pile of your own hubris, because I happen to be writing a book with the CEO of Danger, Hank Nothhaft. That’s right, I work every single day with the sucvcessful entreprepreneur who led Danger to a huge $500 million acquisition by MS — and who has built 6 successful companies in his 35-year career.

He knows what happened to Danger. I know. But you don’t, except for maybe a couple of tidbits here and there which you have unwisely used here to claim authoritative knowledge..

What you don’t know (or have conveniently forgotten to mention) is that this truly wonderful groundbreaking company called Danger had over 100 patents (50 issued and 50 pending) when MS bought it. Danger had a great reputation and a great product (SideKick) that was innovative and groundbreaking for being the first to offer a great user experience with messaging and social networks. Their patents, according to people I know who worked with and even led the company, were critical to their being able to develop their standing and position in the market — as well as to making them worth $500 million to MS.

So yes, I read that MiniMicrosoft blog and, of course, it’s a sad story of how groundbreaking innovations and great companies get swallowed up and killed inside big firm like Microsoft.

Hank has told me of the many emails he is now receiving from former Danger-turned-Microsoft employees explaining how awful it was and what happened. I also know that the Danger team, having gotten their 2 year retentionm bonmuses now, are leaving MS in swarms for Google, Apple and other great companies, where their skills and reputations as ex-Danger employees is much valued and admired. And

It hardly needs to be said that included among these highly-valued people are individuals who helped get many of Danger’s equally-admired patents. Or that Apple and Google are both extremely active patentees, filing almost constantly for new patents.

It is of course true that MS bought Danger and killed it through gross incompetence. You claim it’s because MS is patenting. Bull! Name one single patent that the company got that had anything to do with Danger or Kin. Tell me exactly how patenting slowed down and destroyed the great innovations that Danger developed WITH patenting.

Which was my whole point. Microsoft killed Danger, a profitable, innovative company. From the outside, it appears to be incompetence on Microsoft’s part, which based on my dealings with Microsoft while I was still programming for a living wouldn’t surprise me in the least.

You can’t. You make a blanket statement that in general, MS’s dfecline began in the same TIME PERIOD as the company began patenting. But you don’t even know where MS did the bulk of its patenting (although I do), or whether any of those patents had anything to do with particular product failures.

The one thing we both agree on is that patents won’t help a dumb company.

But then not one single person here ever claimed they would.

Which was my whole point – patents don’t matter at all, if the company in question is unable to execute. Microsoft is terminally unable to execute. The number of new product failures that they’ve had indicate huge internal problems. I personally blame the entire thing on management. I don’t think that Steve Ballmer is the right man to run the company.

And of course the Ballmer years coincide with the years that Microsoft has been spending money on R&D (and patents) like a drunken sailor. Apple, which spends far less money on R&D has produced a range of new products during that time, which have changed the consumer electronics sector.

But the problems actually go back far further than that. Microsoft had problems with a compiler at one point. I was one of the people who complained about the problems, Microsoft promised to get back to me as quickly as possible with an answer. Eight months later I had a phone call from them with a solution. The only problem was I’d blown a month building my own work around (which was almost exactly what they recommended). One month of production wasted. You can bet that I wasn’t going to recommend Microsoft compilers any more!

That was in the late Eighties, and it seems that things have only gotten worse since, and is one of the reasons that I don’t run Microsoft software on any of my computers, they all run either OSX or Linux.

It is painfully obvious that the Mad Hatter knows very little about law, legal arguments and the patent system. Wayne, your personal knowledge blinds you from accepting things that you do not want to accept. No amount of “facts” or argument will break through that shield and you will forever not understand the patent arena, blocked by yourself.

While I appreciate all the Kool-Aid you buy from me, like a good bartender, I have to cut you off because you do not recognize your drinking problem.

Ah, but I know business, sales, computer operating systems, politics, educational systems (schools), and a wide range of other things. Also of course my legal expertise is with Canadian law, which is different.

Wayne

Blind DogmaJuly 9, 2010 8:16 am

Mad Hatter,

Do not confuse “experience” with Canadian law with “expertise” of law.

Your lack of logic, poor presentation of arguments and misuse of facts with drawing conclusions based on an incomplete picture (only your experiences) show a lack of legal expertise in any country.

When you garner true legal expertise you learn the fundamentals of critical thinking that then can be applied to different regimes of law. It is those lack of fundamentals that make following your discussion painful.

The Mad HatterJuly 9, 2010 4:24 pm

I have never claimed to have legal expertise, I am not a lawyer. As to the so called ‘lack of logic’, I’m not a logician either. I do however have a vested interest in the subject, and I’m learning more about it all of the time.

And yes, I know I’m pissing people off. This isn’t personal. It’s politics.

Wayne

Dale B. HallingJuly 9, 2010 4:47 pm

Mad Hatter

“This isn’t personal. It’s politics.”

Your statement proves you are not interested in the reason- you are pushing a political agenda and have no interest in the truth.

Blind DogmaJuly 9, 2010 5:15 pm

“Also of course my legal expertise is with

compares to

“I have never claimed to have legal expertise”

A two second example of the carelessness of your position and poor arguments – the quotes are from your immediate last two contributions. Do you realize why I had to cut you off from the Kool Aid?

Also, whether you piss people off or not is not the issue – the pain comes from your ignorance – and it is a pain both for you (you will remain ignorant as long as you persevere in your current mode) and the pain is for those here who wish to establish an actual dialouge. As Dale points out – you are not here for a dialouge, you are here to push your agenda.

The Mad HatterJuly 9, 2010 11:09 pm

I mentioned that this is politics, and I should explain. I am a Conservative. A very right wing conservative in many ways. I don’t believe that the government should be in the business of supporting corporations. Patent rights as they are currently written are a government subsidy. This does not serve society.

If patent rights were not assignable, in other words if the rights were retained by the inventor, I would be far happier with the patent system. I have suggested this for copyrights also. If a corporation wanted to retain the use of a patent, it should be able to, for a period of no more than five years, with no automatic renewals (which is the same as the suggestion I made for copyright as well).

Another issue is the incompetence in the US Patent and Trademark Office. The Eolas v. Microsoft case was mentioned – I’ve read the patent in question, and the same technology was in use long before Eolas filed for that patent. While I’m no fan of Microsoft, the company took damage from a Patent Office which didn’t fulfill it’s mandate, and from a court system that appears to be little better.

I’m not in this to become popular – in fact members of my own party regard me as a rabid dog. I am however a patriotic Canadian, and my actions are those that I believe will benefit my country. Since our largest trading partner has disastrous Intellectual Property laws, I also target those. These laws do not protect the inventors, nor do they protect society. (One of the reasons that Patent Law was standardized in England was to prevent the government from issuing patents for existing ideas, unfortunately the American patent office appears to have forgoten this, which leads to situations like the EOLAS and Amazon ‘One Click’ patents being issued.)

Wayne

The Mad HatterJuly 9, 2010 11:30 pm

“This isn’t personal. It’s politics.”

Your statement proves you are not interested in the reason- you are pushing a political agenda and have no interest in the truth.

Which truth?

1) The truth that the current patent system in the United States has serious problems?

2) The truth that the United States is attempting to export it’s current flawed system to other countries via trade agreements?

3) The truth that patents are supposed to be issued for the benefit of the citizens of the United States, and that the benefits to the inventors are really a side issue?

4) The truth that many people involved in the system cannot see the issues, they are too close to the situation and are unable to take a rational view of the problems?

5) The truth that Congress is unable and unwilling to fix the mess?

6) The truth that certain players are gaming the system, and when they are caught doing so, there is no deterrent worth mentioning, to teach them not to do so (while some poor bastard who steals a loaf of bread under the third strike laws will receive punishment wildly out of proportion to the act)?

7) The truth that a corporation is not a person, regardless of what a court case found.

In the end politics is the only way to fix the problems that exist (such as double dipping – using Copyright Law and Patent Law for the same product).

If it helps, think of me as a graying, balding, overweight, Don Quixote using a pen for a sword, and a MacBook Pro laptop as a shield.

Wayne

Blind DogmaJuly 10, 2010 11:42 am

Read Sun Tzu Mad Hatter.

You want to wage a war on terrain you refuse to understand. No matter how “noble” you view your cause, by pursuing such a Quixotic path, you harm the cause you hold so dear.

The Mad HatterJuly 17, 2010 9:27 pm

Blind Dogma,

I read Sun Tzu over 30 years ago, and think about his ideas daily. He was a great man, and I’m quite willing to steal ideas from anyone of his stature 🙂

Wayne

Blind DogmaJuly 18, 2010 5:14 pm

As much as you proclaim “’m quite willing to steal “, you need to be quite willing to apply.

Where are you fighting your war? What is the terrain?

The Mad HatterJuly 30, 2010 9:07 am

Blind Dogma,

Ah, but this isn’t a war, it’s a discussion about what will be of the greatest advantage to society. There are many viewpoints by a variety of stakeholders (I am speaking about patents only for the moment). Gene has his opinions, you have yours, I have mine, the only thing that we have in common is that we are willing to talk about it, and we are learning from each other.

Wayne

Blind DogmaJuly 30, 2010 9:31 am

“Ah, but this isn’t a war,”

That’s even scarier that you not only recognize the terrain around you, but that you don’t even recognize the war. Your head is in the sand if you truly believe that this is not a war.

As for learning from each other – the anti-patent manifesto (and I have actually seen it) is to learn only so much as is neccesary to kill patents. There is no desire to learn – you yourself have exhibited this. Why do you think that my Kool-aid sales always spike when a software patent issue is posted on this blog?

Blind DogmaJuly 30, 2010 9:32 am

**not only not recognize…

The Mad HatterJuly 30, 2010 10:15 am

Blind Dogma,

I recognize that you think that this is a war, however that doesn’t mean I agree with you. As you may have noticed, I’m a rather disagreeable person. I’m opinionated, brash, loud, confident, argumentative, and a whole bunch of other adjectives. And yes, ‘Cynical Old Bastard’ fits right in there.

Now as to software patents, there are several issues. Should software be patentable? If software is patentable, should software be covered by copyright? If software can be copyrighted, should patenting also be allowed? If an action is possible using a pencil and paper, and that cannot be patented, then would using software to do the same thing be patentable? What is the difference between software and an algorithym? What is the difference between software and mathematics?

But most importantly, why do you consider the patent protection for software to be so important?

Wayne

Blind DogmaJuly 31, 2010 10:25 am

Mad Hatter,

I would like to think that I could possibly add the word “intelligent” to the list of adjectives that could be applied to you.

You ask some rather basic questions concerning software and IP protection. If you don’t know the differences between copyright and patent, then not only do you not recognize the war, not recognize the terrain, but you hold the weapon with the barrel facing yourself.

It will be difficult to ascribe to your posts any sense of credibility if you don’t understand the basics. If you do want to learn, there are plenty of sources that you can use to get up to the point where your opinions may make some sense. As it stands, I can only discount opinions that have no discernable basis in the reality of intellectual property law. I don’t need your agreement to hold a conversation – I do need you to know the basics because I am not willing to entertain any formed opinions of yours that are not grounded – that’s like arguing with a stone.

The Mad HatterAugust 2, 2010 9:05 am

Blind Dogma,

Rather than sitting there looking confused, why don’t you answer the questions? Once you’ve answered them, you’ll understand my point.

BTW, I assume from several of your statements that you are a lawyer, am I right or wrong?

Wayne

Blind DogmaAugust 2, 2010 10:54 am

“Rather than sitting there looking confused, why don’t you answer the questions? ”

I am not confused so please stop projecting. Your lack of understanding about patent matters indicates that I would be wasting my time answering your questions. You need to understand the context of my answers (indeed you need to understand the context of your questions). Using a Sun Tzu metaphor, you need to find the battle field before we an skirmish.

Until you show some semblance of basic understanding, I will not waste my time.

The Mad HatterAugust 2, 2010 2:51 pm

I am not confused so please stop projecting.

So why are you unwilling to answer the questions?

Blind DogmaAugust 2, 2010 5:20 pm

Are you having a difficult time readin what I am saying beyond the first sentence, Mad?

Here, let me repeat:

I do need you to know the basics because I am not willing to entertain any formed opinions of yours that are not grounded

And let me add – if you don’t understand the basics, including the differences between copyright and patents, what they protect and why software can have both forms of protection, my answering the questions will be like throwing pearls before swine – do you at least recognize that analogy?

It really is painful watching you fall all over your lack of basic knowledge of IP and logic.

I do hope you take me up on my advice and learn a little bit – then come back and we can have an interesting discussion.

The Mad HatterAugust 3, 2010 3:58 am

It really is painful watching you fall all over your lack of basic knowledge of IP and logic.

Coming from you, that line is hilarious, totally hilarious.

Are you having a difficult time readin what I am saying beyond the first sentence, Mad?

Here, let me repeat:

I do need you to know the basics because I am not willing to entertain any formed opinions of yours that are not grounded

And let me add – if you don’t understand the basics, including the differences between copyright and patents, what they protect and why software can have both forms of protection, my answering the questions will be like throwing pearls before swine – do you at least recognize that analogy?

So in other words you aren’t willing to discuss anything, unless the discussion is under your rules, and I agree that you are right before we begin. I can’t remember when I’ve seen such a total lack of confidence before.

Wayne

Blind DogmaAugust 3, 2010 9:25 am

Painful logic continues – if that is the calling card you wish to establish, you are doing a stellar job.

“unless the discussion is under your rules”

If the rules of basic knowledge and ordinary logic are too much for you, then what would be the point of a discussion? I am asking for nothing more than that.

“and I agree that you are right before we begin”

I only ask you to agree with me if indeed such agreement stems from the basic fundamentals of Intellectual Property law. You do need to recognize fundamentals for what they are if we are to start a discussion on a common understanding. Again, starting anywhere else would be a waste of time.

“lack of confidence before.”

Your obvious attempts to bait me to an unprincipled debate are futile. You can try to label your desire to engage in such unprincipled discussions any way you want to, but I lack no confidence. In fact, your continued attempts in light of what you say you have read (Sun Tzu) only point out your lack of confidence in your own beliefs. You are evidently afraid of how those beliefs would appear in the full light of actual law and understanding. Much as you simply disappeared from the discussion of education when I presented facts you could not counter, you again attmpet to evade reason and understanding by appealing to ad hominym methods.

Come back when you are ready to have a real discussion. Otherwise the trading of barbs will never result in anything but the trading of barbs.

The Mad HatterAugust 3, 2010 10:22 pm

Blind Dogma,

I can only call it as I see it – you are unwilling to answer my questions. Without those answers, I don’t know what the basis of your arguments are.

Wayne

Blind DogmaAugust 4, 2010 10:07 am

Mad Hatter,

Likewise, I can only call it as I see it – you are unwilling to educate yourself so that my answers to your questions can be appreciated. Try not to squeeze the trigger while looking down the barrel.

Thank you, but I will not throw the pearls into the pen.

A last bit of advice: Try not to squeeze the trigger while looking down the barrel.

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